ImmunoGen, Inc. Form 10-K
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
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For
the fiscal year ended June 30, 2006
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OR
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o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT
OF 1934
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For
the transition period from
to
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Commission
file number 0-17999
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ImmunoGen,
Inc.
(Exact
name of registrant as specified in its charter)
Massachusetts
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04-2726691
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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128
Sidney Street, Cambridge, MA 02139
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(Address
of principal executive offices, including zip code)
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(617)
995-2500
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(Registrant’s
telephone number, including area
code)
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Securities
registered pursuant to Section 12(b) of the Act:
Title
of Each Class
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Name
of Each Exchange on Which
Registered
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Common
Stock, $.01 par value
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The
NASDAQ Stock Market LLC
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
oYes ýNo
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
oYes ýNo
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
ýYes oNo
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form
10-K
ý
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o
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Accelerated
filer ý
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Non-accelerated
filer o
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). o
Yes ýNo
Aggregate
market value, based upon the closing sale price of the shares as reported by
the
NASDAQ Global Market, of voting stock held by non-affiliates at December 31,
2005 $170,836,485 (excludes shares held by executive officers, directors, and
beneficial owners of more than 10% of the Company’s common stock). Exclusion of
shares held by any person should not be construed to indicate that such person
possesses the power, direct or indirect, to direct or cause the direction of
management or policies of the registrant, or that such person is controlled
by
or under common control with the registrant. Common Stock outstanding at August
23, 2006: 41,485,005 shares.
TABLE
OF
CONTENTS
Part
I
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Item
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Page
Number
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1.
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3 |
1A.
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15 |
1B.
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24 |
2.
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25 |
3.
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25 |
4.
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25 |
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Part
II
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5.
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26 |
6.
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26 |
7.
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27 |
7A.
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36 |
8.
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37 |
9.
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66 |
9A.
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66 |
9B.
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68 |
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Part
III
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10.
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69 |
11.
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69 |
12.
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69 |
13.
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69 |
14.
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69 |
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Part
IV
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15.
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70 |
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In
this
Annual Report on Form 10-K, ImmunoGen, Inc. (ImmunoGen, Inc.,
together with its subsidiaries, is referred to in this document as we, us,
ImmunoGen, or the Company), incorporates by reference certain information from
parts of other documents filed with the Securities and Exchange Commission.
The
Securities and Exchange Commission allows us to disclose important information
by referring to it in that manner. Please refer to all such information when
reading this Annual Report on Form 10-K. All information is as of
June 30, 2006 unless otherwise indicated.
For a
description of the risk factors affecting or applicable to our business, see
“Risk Factors,” below.
The
Company
We
develop
novel, targeted therapeutics for the treatment of cancer using our expertise
in
cancer biology, monoclonal antibodies (antibodies), and small molecule
cell-killing (cytotoxic) agents. Our Tumor-Activated Prodrug (TAP) technology
uses antibodies to deliver a potent cytotoxic agent specifically to cancer
cells. Our TAP technology is designed to enable the creation of highly
effective, well-tolerated anticancer products.
We
believe
that our TAP technology and our expertise in antibodies will enable us to become
a leader in the application of antibodies for the treatment of cancer. We plan
to achieve this goal through the development of our own anticancer products
and
through outlicenses of our TAP technology to other companies. These outlicenses
are designed to expand the number of anticancer therapeutics developed that
can
provide us a financial return by enabling the creation of TAP compounds with
antibodies proprietary to other companies and therefore not available for our
own product programs. Our collaborative partners include: Amgen Inc. (formerly
Abgenix, Inc.); Biogen Idec, Inc.; Boehringer Ingelheim International GmbH;
Centocor, Inc. (a wholly owned subsidiary of Johnson & Johnson);
Genentech, Inc.; Millennium Pharmaceuticals, Inc.; the sanofi-aventis
Group; and effective July 7, 2006, Biotest AG. We also have a broader
collaboration with sanofi-aventis
We
believe that the key initiatives to successfully carry out our business plan
are:
§
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Develop
and advance our proprietary product pipeline.
We currently have
two TAP product candidates for which we own the rights to develop
and
commercialize: huN901-DM1 and huC242-DM4. HuN901-DM1
is in clinical testing for the treatment of cancers that express
the CD56
antigen, which include small-cell lung cancer, other cancers of
neuroendocrine origin, and many cases of multiple myeloma as well
as other
hematological malignancies. HuC242-DM4 is in clinical testing for
the
treatment of cancers that express the CanAg antigen, which include
colorectal, pancreatic, other gastrointestinal cancers and many non-small
cell lung cancers. We
intend to advance
huN901-DM1 and huC242-DM4 through human clinical trials that can
establish
their clinical utility in a certain indication or indications. We
also
intend to capitalize on our technological expertise in antibodies
and our
preclinical and clinical development expertise in oncology to broaden
our
proprietary pipeline. We may support this effort by acquiring promising
product candidates from third parties, by developing additional novel
product candidates internally, or both. We also intend to exploit
this
pipeline by selectively out-licensing certain compounds for development
by
third parties. With the exception of those antibodies or antibody
targets
that are the subject of our preexisting or future collaboration and
license agreements, during the term of our collaborative research
program
with sanofi-aventis, we are required to propose for inclusion in
the
collaborative research program certain antibodies or antibody targets
that
we believe will have utility in oncology. Sanofi-aventis then has
the
right to either include in or exclude from the collaborative research
program these proposed antibodies and antibody targets. If sanofi-aventis
elects to exclude any antibodies or antibody targets, we may choose
to
develop the products.
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§
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Support
our current collaborators.
We have
successfully out-licensed our TAP technology to third party collaborators.
We also out-licensed certain product candidates to sanofi-aventis
to
expedite their development. We anticipate that these arrangements
will
generate cash flow through upfront fees, milestone payments and royalties
on the sales of any resulting products. Currently, two products from
these
collaborations, AVE9633 and trastuzumab-DM1, are in Phase I clinical
trials. AVE9633
is in clinical testing by sanofi-aventis for the treatment of acute
myeloid leukemia and trastuzumab-DM1 is in clinical testing by Genentech
for the treatment of HER2-expressing metastatic breast cancer.
We
expect additional compounds to advance into clinical testing going
forward. Our
strong base of
established strategic alliances with major pharmaceutical and
biotechnology companies has the potential to provide us with substantial
cash flow, furnish us with access to important technology and
capabilities, broaden our product development pipeline , and reduce
our
product development risks. These alliances also enhance our ability
to
bring products to market because of our collaborators’ substantial
resources, proprietary targets and expertise in research, preclinical
and
clinical development, regulatory issues, manufacturing and
marketing.
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§
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Establish
and expand strategic alliances.
We intend to
continue to out-license our TAP technology to third party collaborators.
We already have a strong base of established strategic alliances
with
major pharmaceutical and biotechnology companies and, in the future,
we
intend to enter into additional collaborations that may provide us
with
additional cash flow, furnish us with access to important technology
and
capabilities, broaden our product development pipeline and reduce
our
product development risks.
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We
were
organized as a Massachusetts corporation in March 1981. Our principal
offices are located at 128 Sidney Street, Cambridge, Massachusetts 02139, and
our telephone number is (617) 995-2500. We maintain a web site
at
www.immunogen.com,
where
certain information about us is available. Please note that the information
contained on the website is not a part of this document. Our annual reports
on
Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and any amendments to those reports are available free of charge
through the “Investor Relations” section of our website as soon as reasonably
practicable after those materials have been electronically filed with, or
furnished to, the Securities and Exchange Commission. We have adopted a Code
of
Corporate Conduct that applies to all our directors, officers and employees
and
a Code of Ethics that applies to our senior officers and financial personnel.
Our Code of Corporate Conduct and Senior Officer and Financial Personnel Code
of
Ethics are available free of charge through
the Investor Relations section of our website.
Our
TAP Technology
Traditional
chemotherapeutics typically kill healthy cells as well as cancerous cells,
which
can limit their ability to be dosed to full potential and result in significant
side effects. Antibodies, in contrast, can be created that bind specifically
to
targets found on cancer cells, thereby allowing them to selectively attach
to
these cells. However, many of the antibodies that have been created to bind
specifically to targets found on cancer cells have been found to have little,
if
any, impact on a cancer cell once bound to it. Our TAP technology uses
tumor-targeting antibodies to deliver a potent cell-killing agent specifically
to cancer cells in order to kill these cells with minimal damage to healthy
tissue. This technology can be used to create potent anticancer therapeutics
with antibodies that are unlikely to otherwise become commercial products.
The
cell-killing agents we attach to antibodies were developed specifically for
antibody-directed delivery to cancer cells and have the following
features:
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·
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Potency. Our
cytotoxic agents are 1,000- to 10,000-fold more potent than traditional
chemotherapeutic agents, and are thus capable of killing cancer cells
at
the low concentrations that can be achieved inside a solid tumor
when
attached to an antibody. The agents used in all TAP compounds currently
in
clinical or preclinical development are derivatives of maytansine,
a
highly potent molecule that inhibits the formation of a substance
-
tubulin - necessary for successful cell division.
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·
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Attachable. Our
cytotoxic molecules can be attached to an antibody using one of our
linkers, which achieve a stable link between the agent and the antibody
while the TAP compound is circulating in the bloodstream, but enables
the
cytotoxic agent to exhibit its full potency once inside a cancer
cell.
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Non-immunogenic. We
use small molecules rather than protein-based toxins to avoid the
stimulation of an immune response that would limit the activity of
TAP
compounds upon repeat
administration.
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Producible. Our
cytotoxic agents are readily able to be manufactured from a precursor,
ansamitocin P3, which is produced via
fermentation.
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Protectable.
We
patent our cytotoxic agents and related derivatives to protect these
assets.
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We
have
developed alternative cell-killing agents (such as DM1 and DM4) and alternative
means of their attachment to antibodies (such as highly-hindered disulfide
bond,
less-hindered disulfide bond, thioether bond) as we and our collaborators have
found that the best design for each TAP compound varies depending upon the
antibody and its target. These innovations are reflected in TAP compounds now
in
clinical testing.
In
addition to our TAP technology, we have established expertise in the development
and humanization of antibodies and in cancer biology. Our manufacturing facility
in Norwood, MA, helps us and our collaborators rapidly advance new TAP compounds
into human trials by enabling the production of the drug supplies needed for
initial clinical testing. Our Norwood facility has four manufacturing suites
and
all of the functions needed to make TAP compounds in compliance with the current
Good Manufacturing Practice, or cGMP, as provided by the United States Food
and
Drug Administration. We use this expertise together with our TAP technology
to
develop TAP compounds. We also use this expertise to develop “naked”
(non-immunoconjugate) antibody compounds. For example, we developed the
anti-IGF-1R naked antibody now in development by sanofi-aventis as AVE1642.
Product
Candidates
The
following table summarizes the antigen target, cancer(s) expressing the target,
and development stage for compounds in development by us and our collaborators.
The results from preclinical testing and early clinical trials may not be
predictive of results obtained in subsequent clinical trials and there can
be no
assurance that our or our collaborators’ clinical trials will demonstrate the
level of safety and efficacy of any product candidates necessary to obtain
regulatory approval.
Product
Candidate
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Antigen
Target
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Cancer(s)
expressing target
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Development
Stage(1)
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Collaborative
Partner
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HuN901-DM1
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CD56
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Small-cell
lung cancer; certain neuroendocrine cancers; certain hematological
malignancies
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Phase
I and Phase II
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Proprietary
to ImmunoGen
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HuC242-DM4
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CanAg
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Gastrointestinal
cancers, including colorectal, pancreatic, and gastric cancers; many
non-small-cell lung cancers
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Phase
I
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Proprietary
to ImmunoGen
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AVE9633
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CD33
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Acute
myeloid leukemia
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Phase
I
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sanofi-aventis
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Trastuzumab-DM1
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HER2
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HER2-positive
metastatic breast cancers
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Phase
I
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Genentech
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AVE1642
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IGF-1R
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Solid
tumors and certain hematological malignancies
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Research/preclinical
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sanofi-aventis
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SAR3419
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CD19
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B-cell
malignancies including non-Hodgkin’s lymphoma
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Research/
preclinical
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sanofi-aventis
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TAP
compound
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Cripto
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Solid
tumors
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Research/
preclinical
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Biogen
Idec
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TAP
compound
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av
integrin
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Multiple
tumor types
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Research/
preclinical
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Centocor
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TAP
compound
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On
multiple myeloma
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Multiple
myeloma, other
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Research/preclinical
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Biotest
AG *
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TAP
compounds
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Undisclosed
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Undisclosed
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Research/preclinical
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Genentech
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Others
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Undisclosed
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Undisclosed
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Research/preclinical
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ImmunoGen,
Partners
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(1)
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Compounds
that are
not in clinical testing and have an undisclosed status are listed
as
research/preclinical.
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(*) As
of July 7,
2006
HuN901-DM1
We
are
developing the TAP compound, huN901-DM1, for the treatment of CD56-expressing
cancers. These include small-cell lung cancer (SCLC), other cancers of
neuroendocrine origin, and many cases of multiple myeloma as well as other
hematological malignancies. This product candidate consists of our huN901
antibody, which binds to CD56, with our DM1 attached as the cell-killing agent.
We
have
three clinical trials underway with huN901-DM1. Study 001 is evaluating the
compound when dosed weekly for four weeks every six weeks. This study was
started by our former partner, British Biotech (now Vernalis), and assumed
by us
on July 1, 2004. The Phase II segment of this study that is underway evaluates
huN901-DM1 when given at the maximum tolerated dose (MTD), as established in
the
Phase I segment of the study, to patients with relapsed SCLC. Objective evidence
of anticancer activity was reported among the initial 14 patients treated,
prompting the expansion of this leg of the study to include 35 patients. Patient
enrollment is underway at multiple clinical centers in the United States. Study
002 also was started by British Biotech and was assumed by us in December 2005.
This study evaluates huN901-DM1 in the treatment of solid tumors such as SCLC,
but in Study 002 the compound is dosed daily for three days in a 21-day cycle.
Interim data from this study were reported at the American Association for
Cancer Research (AACR), the U.S. National Cancer Institute (NCI) and the
European Organisation for Research and Treatment of Cancer (EORTC), or the
AACR-NCI-EORTC, meeting in November 2005 and included objective evidence of
antitumor activity. We expect to report additional findings from this study
within the next twelve months.
In
Study
003, huN901-DM1 is being evaluated in the treatment of the hematological or
“liquid” tumor malignancy, multiple myeloma. Approximately 70% of multiple
myeloma cases express CD56. We expect to report data from this study within
the
next twelve months. We are evaluating additional development opportunities
for
this compound.
HuC242-DM4
Our
TAP
product candidate, huC242-DM4, consists of the humanized antibody, huC242,
with
our DM4 cell-killing agent attached. HuC242 binds to the CanAg receptor found
on
colorectal, pancreatic, and other gastrointestinal tumors and on many
non-small-cell lung cancers.
This
compound is in Phase I clinical testing for the treatment of CanAg-expressing
cancers. In this dose-escalation study, huC242-DM4 is administered every three
weeks to patients with refractory CanAg-expressing cancers. The primary
objective of this study is to evaluate the safety and pharmacokinetics of
huC242-DM4 and to identify its MTD with this dosing schedule. Once the MTD
is
defined, additional patients will be enrolled with tumors that consistently
and
intensely express CanAg to gain further experience with the compound in that
patient population. We expect to report data from this study and to complete
patient enrollment in it within the next twelve months.
An
earlier
version of this compound, huC242-DM1, was found to be well tolerated in initial
clinical testing and to demonstrate evidence of anticancer activity. Based
on
our preclinical studies, we expect huC242-DM4 to be more effective than
huC242-DM1 with a comparable tolerability profile.
AVE9633
This
TAP
compound was developed by us and licensed to sanofi-aventis from our preclinical
pipeline as part of a broader collaboration. It comprises our huMy9-6 antibody,
which targets CD33, and our DM4 cell-killing agent. On March 16, 2005,
sanofi-aventis informed us that patient dosing with AVE9633 had begun,
triggering a $2 million milestone payment to us. This compound is in clinical
testing in the United States and Europe for the treatment of acute myeloid
leukemia.
Trastuzumab-DM1
Genentech
developed this TAP compound under a 2000 license that grants Genentech the
exclusive right to use our maytansinoid TAP technology (such as DM1 and DM4)
with antibodies to HER2 including trastuzumab (Herceptin®). On January 27, 2006,
Genentech informed us that the Investigational New Drug (IND) application for
trastuzumab-DM1 had become effective, triggering a $2 million milestone payment
to us. Phase I evaluation of trastuzumab-DM1 is underway in patients with
HER2-expressing metastatic breast cancer.
Herceptin®
is a registered trademark of Genentech.
AVE1642
This
naked
antibody compound was developed by ImmunoGen and licensed to sanofi-aventis from
our preclinical pipeline as part of our broader collaboration with
sanofi-aventis. AVE1642 binds to and blocks IGF-1R and has potential utility
in
the treatment of certain solid tumors and hematological malignancies.
SAR3419
Sanofi-aventis
also licensed this TAP compound from our preclinical pipeline as part of our
broader collaboration. SAR3419 targets CD19, which is associated with certain
B-cell malignancies, including non-Hodgkin’s lymphoma, and is in preclinical
development.
Cripto-targeting
TAP compound
This
TAP
compound is in development by Biogen Idec under a 2004 license that grants
Biogen Idec the exclusive right to use our maytansinoid TAP technology with
antibodies to the tumor cell target Cripto.
av
integrin-targeting TAP compound
This
TAP
compound is in development by Centocor under the 2004 license that grants
Centocor the exclusive right to use our maytansinoid TAP technology with
antibodies to the cancer target α
v integrin.
Biotest
TAP
compound*
This
TAP
compound is in development by Biotest AG under the 2006 license that grants
Biotest the exclusive right to use our maytansinoid TAP technology with
antibodies to a specific target found on multiple myeloma and certain other
cancers.
(*)
effective July 7, 2006
Other
Compounds in Development
Additional
undisclosed product candidates are in development internally and through our
collaborations with sanofi-aventis, Genentech and others.
MLN2704
In
February 2002, Millennium licensed the exclusive right to use our TAP technology
with antibodies to the Prostate-Specific Membrane Antigen (PSMA). In November
2002, Millennium initiated clinical testing with MLN2704, a TAP compound
comprising our DM1 cell-killing agent and the PSMA-targeting J591 antibody
licensed by Millennium from BZL Biologics. In 2004, 2005, and 2006, findings
from two early-stage clinical trials with MLN2704 were reported at the annual
meeting of the American Society of Clinical Oncology. During 2005, Millennium
disclosed that the company expected to make a “next step” decision for MLN2704
by year end. In early January 2006, Millennium disclosed that there were
concerns related to the economics and therapeutic window of the compound, and
in
late January 2006, Millennium announced that the company was discontinuing
further development of MLN2704. Millennium retains the Company’s exclusive right
to use our TAP technology with antibodies to PSMA.
Bivatuzumab
mertansine
In
November 2001, Boehringer Ingelheim licensed the exclusive right to use our
DM1
TAP technology with antibodies that target CD44. In late 2002, Boehringer
Ingelheim advanced into clinical testing a TAP compound, bivatuzumab mertansine,
consisting of their anti-CD44v6 antibody and our DM1. On February 7, 2005,
Boehringer Ingelheim informed us that they had elected to discontinue
development of bivatuzumab mertansine due to the occurrence of skin toxicity
in
early clinical testing in patients with advanced carcinoma. Published data
indicate that CD44v6 is expressed on normal proliferating epidermal skin cells
as well as on various carcinomas. Boehringer Ingelheim has exercised its option
to substitute a different target in the agreement with us.
Our
Market Opportunity
Cancer
remains a leading cause of death worldwide and the second leading cause of
death
in the United States The American
Cancer
Society (ACS) estimates that 565,000 people will die from cancer in the United
States in 2006. The ACS also projects that 1.4 million people in the United
States will be diagnosed with cancer this year.
Because
cancer is a progressive disease, the total number of people living with cancer
significantly exceeds the number of patients diagnosed with cancer in a given
year.
Targeted
anticancer therapies offer potential advantages in efficacy and tolerability
over traditional chemotherapeutic agents. At the same time, their potential
market is limited to those cancers that express their target. In recent years,
several targeted anticancer therapies have enjoyed considerable commercial
success. These include rituximab (Rituxan®), an antibody that targets the CD20
antigen associated with certain B-cell malignancies, and trastuzumab
(Herceptin®), an antibody that targets HER2 expression associated with certain
breast cancers.
The
potential market for anticancer drugs exceeds the number of patients treated
with anticancer drugs as many types of cancer are typically treated with
multiple agents at the same time. Additionally, patients often receive multiple
drug regimens sequentially, either to treat recurrence of the disease or to
help
prevent recurrence of the disease.
®
registered trademark of Genentech
Out-Licenses
and
Collaborations
As
part
of our business strategy to develop and commercialize TAP compounds, we enter
into license agreements with third parties where we grant them the right to
use
our TAP technology with their proprietary antibodies. In some cases, we have
out-licensed certain rights to our own TAP compounds to companies with product
development and commercialization capabilities that we desired to access. In
exchange, we are entitled to receive upfront fees, potential milestone payments
and royalties on any product sales. Our principal out-licenses and collaborative
agreements are described below.
sanofi-aventis
( formerly Aventis)
In
July 2003, we entered into a broad collaboration agreement with Aventis
(now sanofi-aventis) to discover, develop and commercialize anticancer
therapeutics. The agreement provides sanofi-aventis with worldwide
commercialization rights to new product candidates created through the
collaboration as well as worldwide development and commercialization rights
to
three product candidates from our preclinical pipeline: our anti-CD33 TAP
compound (AVE9633) for acute myeloid leukemia, our anti-IGF-1R antibody
(AVE1642) for multiple cancers and our anti-CD19 TAP compound (SAR3419) for
certain B-cell malignancies. The overall term of the agreement
extends to the later of the latest patent to expire or 12 years after the
latest launch of any product discovered, developed and/or commercialized under
the agreement. The agreement provides that we will receive a minimum of
$50.7 million of committed research funding during a three-year research
period that began September 1, 2003, of which a substantial portion has been
received as of June 30, 2006.
Under
the
2003 agreement, sanofi-aventis has the option, upon giving 12 months'
advance notice for each, to request that we extend the research program for
two
additional 12-month periods. The collaboration agreement also provides for
certain other payments based on the achievement of product candidate milestones
and royalties on sales of any resulting products, if and when such sales
commence. Assuming all benchmarks are met, we will receive milestone payments
of
between $21.5 million and $30.0 million per antigen target. In August
2005, sanofi-aventis exercised its contractual right to extend the term of
its
research program with us and committed to fund $18.2 million in research and
support over the 12 month period following September 1, 2006. This funding
is in
addition to the research and support already committed for the three years
ending August 31, 2006. Sanofi-aventis must notify us no later than August
31,
2006 if they intend to extend the research program for the second additional
12-month period that begins in September 2007. Should they elect to exercise
its
contractual right to extend the term of the research program for the second
additional 12-month period, we will receive additional research funding.
The
sanofi-aventis collaboration agreement provides us an option to certain
co-promotion rights in the United States on a product-by-product basis.
Sanofi-aventis is responsible for the cost of the development, manufacturing
and
marketing of any products created through the collaboration. We are reimbursed
for any preclinical and clinical materials that we make under the
agreement.
The
terms
of our collaboration agreement with sanofi-aventis place certain restrictions
upon us. Subject to pre-existing obligations under our other collaboration
agreements that were in effect at the time we signed the collaboration agreement
with sanofi-aventis, (i) we may only enter into a specified number of
additional single target collaboration agreements during the term of the
collaborative research program, (ii) during the term of the collaborative
research program and for a specified period thereafter, we are prohibited from
entering into any single target license, other than with sanofi-aventis, related
to use of our TAP technology with any taxane effector molecule, and
(iii) during the
course of the collaborative research program, we are obligated to propose to
sanofi-aventis promising targets for antibody-based anticancer agents up to
a
defined maximum number of targets. These targets can lead to the creation of
new
collaboration products that potentially can be an additional source of milestone
payments and royalties to us. Whether or not sanofi-aventis elects to pursue
development of compounds to these targets depends on factors that include
perceived commercial opportunity, compatibility with other sanofi-aventis
programs, internal business policies, and the number of targets already
accepted.
Additionally,
the terms of
the collaboration agreement allow sanofi-aventis to terminate our participation
in the research program and/or our co-promotion rights if there were a change
of
control of the Company.
Biogen
Idec,
Inc.
On
October 1, 2004, we entered into a development and license agreement with Biogen
Idec, Inc. Under the terms of the agreement, Biogen Idec received exclusive
worldwide rights to develop and commercialize anticancer therapeutics using
antibodies to the tumor cell target Cripto and a maytansinoid cell-killing
agent
developed by us. Biogen Idec is responsible for the research, development,
manufacturing, and marketing of any products resulting from the license. Under
the terms of the agreement, we received from Biogen Idec an upfront payment
of
$1.0 million upon execution of the agreement. This upfront amount is subject
to
credit, as defined under the agreement, if Biogen Idec does not submit certain
regulatory filings by June 30, 2008. Assuming all benchmarks are met, we could
receive up to $42.0 million in milestone payments under this agreement. We
will
also receive compensation from Biogen Idec for product development research
done
on its behalf, as well as for the production of preclinical and clinical
materials.
Biotest
AG
Subsequent
to the end of
fiscal 2006, on July 7, 2006, we entered into a development and license
agreement with Biotest AG. The agreement grants Biotest AG exclusive rights
to
use our TAP technology with antibodies to a specific target to create anticancer
therapeutics. Under the agreement, we received a $1 million upfront payment
upon
execution of the agreement, and could potentially receive up to $35.5 million
in
milestone payments, and royalties on the sales of any resulting products. We
will receive manufacturing payments for any preclinical and clinical materials
made at the request of Biotest. The agreement also provides us with the right
to
elect to participate, at specific stages during the clinical evaluation of
any
compound created under this agreement, in the United States development and
commercialization of that compound in lieu of receiving royalties on United
States sales of that product and milestone payments not yet earned. We can
exercise this right by making a payment to Biotest of an agreed-upon fee of
$5
million or $15 million, depending on the stage of development. Upon exercise
of
this right, we would share equally with Biotest the associated costs of product
development and commercialization in the United States along with the profit,
if
any, from United States product sales.
Boehringer
Ingelheim International GmbH
In
November 2001, we
entered into a collaboration agreement with Boehringer Ingelheim that enables
Boehringer Ingelheim to develop TAP compounds that combine our TAP technology
with antibodies to CD44. Under the terms of the agreement, we received an
upfront payment upon commencement of the agreement and could receive, based
upon
the exchange rate on November 27, 2001, the effective date of the
agreement, approximately $41.5 million in potential payments upon
Boehringer Ingelheim's achievement of certain milestones in addition to royalty
payments on future product sales, if and when such sales commence. In
October 2002, Boehringer Ingelheim confirmed with us that clinical testing
of the novel anticancer agent, bivatuzumab mertansine, composed of ImmunoGen's
DM1 effector molecule and Boehringer Ingelheim's anti-CD44v6 antibody, had
commenced on or about September 24, 2002. This event triggered a milestone
payment of $1.0 million from Boehringer Ingelheim to us. On February 7,
2005, Boehringer Ingelheim notified us that development of bivatuzumab
mertansine had been discontinued. Boehringer Ingelheim retained its right to
use
our DM1 TAP technology and has exercised its right to create an anticancer
compound to a different antigen.
Centocor
On
December 23, 2004, we entered into a development and license agreement with
Centocor, Inc., a wholly owned subsidiary of Johnson and Johnson. Under the
terms of this agreement, Centocor has exclusive worldwide rights to develop
and
commercialize anticancer therapeutics that comprise an antibody developed by
Centocor that binds to the cancer target αv
integrin and a
maytansinoid cell-killing agent developed by us. Centocor is responsible
for the research, development, manufacturing, and marketing of any products
resulting from the license. Under the terms of the agreement, we received a
non-refundable upfront payment of $1.0 million upon execution of the
agreement. In addition to royalties on future product sales, when and if
such sales commence, the terms of the agreement include certain other payments
upon Centocor’s achievement of milestones. Assuming all benchmarks are
met, we would receive $42.5 million in milestone payments under this
agreement.
Millennium
Pharmaceuticals, Inc.
In
March 2001, we entered into a five-year collaboration agreement with
Millennium upon which we received a non-refundable upfront fee of
$2.0 million. Millennium acquired a license to utilize our TAP technology
in its antibody product research efforts and an option to obtain product
licenses for a restricted number of antigen targets during the collaboration.
For each license to an antigen target taken, the collaboration agreement
provides for license and milestone payments potentially totaling
$41.0 million and royalties on sales of any resulting products, if and when
such sales commence. Millennium is responsible for product development,
manufacturing and marketing of any resulting products. We are to be reimbursed
for any preclinical and clinical materials that we make under the agreement.
Pursuant
to this agreement, in February 2002 Millennium licensed the exclusive right
to use our maytansinoid technology with antibodies targeting the
Prostate-Specific Membrane Antigen (PSMA). In March 2002, we received a
license fee from Millennium pursuant to this license agreement. In
November 2002, Millennium informed us that clinical testing of MLN2704,
comprised of our cytotoxic agent DM1 and Millennium's MLN591 antibody, had
been
initiated. This event triggered a milestone payment of $1.0 million from
Millennium to us. On January 25, 2006, Millennium notified us that, as part
of
its ongoing portfolio management process and based on the evaluation of recent
clinical data in the context of other opportunities in its pipeline, Millennium
had decided not to continue the development of its MLN2704 compound. Millennium
retains its right to use our maytansinoid TAP technology with antibodies
targeting PSMA.
On
March
27, 2006, we agreed to amend the 2001 agreement with Millennium, which was
scheduled to expire March 30, 2006. The amendment extends the agreement for
an
additional year which ends March 30, 2007. In consideration for this extension,
Millennium paid us an extension fee equal to $250,000.
Amgen, Inc.
(formerly Abgenix)
In
September 2000, we entered into a collaboration agreement with Abgenix (now
Amgen).
The agreement provides
Amgen with access to our maytansinoid technology for use with their antibodies
along with the ability to acquire both exclusive and nonexclusive options to
obtain product licenses for antigen targets. Each option has a specified option
period during which Amgen may obtain a product license. Under this agreement
Amgen has the right to extend each option period by a specified amount of time
in exchange for an extension fee. We received a total of $5.0 million in
technology access fee payments under this agreement and are entitled to
potential milestone payments and royalties on net sales of resulting products,
if and when such sales commence. In addition, on September 7, 2000, Abgenix
purchased $15.0 million of our common stock in accordance with the
agreement. We understand that these shares were sold in fiscal 2006. Our
agreement with Amgen will terminate upon expiration of the 10-year term plus
any
exercised option extension periods during which Amgen has access to our
technology.
Vernalis
(formerly British Biotech plc)
In
August
2003, Vernalis completed its acquisition of British Biotech. In connection
with
this acquisition, the merged company, called Vernalis plc, announced that it
intended to review its merged product candidate portfolio, including its
collaboration with ImmunoGen on huN901-DM1. After discussion with Vernalis,
in
January 2004, we announced that we would take over further development of the
product candidate, including the advancement of huN901-DM1 in our own clinical
trials. Pursuant to the terms of the termination agreement executed on January
7, 2004, Vernalis, which relinquished its rights to the product, would, at
its
own expense, complete Study 002 and was responsible for Study 001 through June
30, 2004. On December 15, 2005, we executed an agreement to amend the residual
obligation terms of the January 7, 2004 Termination Agreement with Vernalis.
Under the terms of the amendment, we assumed responsibility for Study 002 as
of
December 15, 2005, including the cost of its completion. Under the amendment,
Vernalis paid us $365,000 in consideration of the expected cost of the
obligations assumed by us under the amendment.
Genentech, Inc.
In
May 2000, we entered into two separate agreements with Genentech. The first
agreement grants Genentech an exclusive license to our maytansinoid technology
for use with antibodies, such as trastuzumab (Herceptin®),
that target HER2. Under
the terms of this agreement, Genentech has exclusive worldwide rights to develop
and commercialize TAP compounds with antibodies that target HER2. Genentech
will
be responsible for manufacturing, product development and marketing of any
products resulting from the agreement; we will be reimbursed for any preclinical
and clinical materials that we manufacture under the agreement. We received
a
$2.0 million non-refundable payment upon execution of the agreement. In
addition to royalties on net sales if and when they occur, the terms of the
agreement include other payments based upon Genentech's achievement of
milestones. Assuming all benchmarks are met, we will receive $39.5 million
in upfront and milestone payments under this agreement. On January 27, 2006,
Genentech notified us that the trastuzumab-DM1 Investigational New Drug (IND)
application submitted by Genentech to the FDA had become effective. Under the
terms of the May 2000 exclusive license agreement for the HER2 target, this
event triggered a $2.0 million milestone payment to us. On May 4, 2006, we
amended the May 2000 agreement. This amendment increases the potential milestone
payments to us under this agreement by $6.5 million to $44 million and the
potential royalties to us on any HER2-targeting TAP compound that may be
developed by Genentech, including trastuzumab-DM1.
We
entered into another agreement with Genentech in May 2000. This second
collaboration provides Genentech with broad access to our maytansinoid
technology for use with Genentech antibodies to other (non-HER2) targets. This
agreement provides Genentech with a license to utilize our maytansinoid
technology in its antibody product research efforts and an option to obtain
product licenses to use our maytansinoid technology with antibodies to a limited
number of antigen targets over the agreement's five-year term. Under this
agreement, we received a non-refundable technology access fee of
$3.0 million in May 2000. This agreement provides for payments for
each antigen target licensed based on Genentech's achievement of milestones
and
royalties on net sales of resulting products, if and when such sales commence.
Genentech renewed this agreement for one subsequent three-year period in April
2005 for an additional technology access fee of $2.0 million.
Under
this agreement, in April 2005, July 2005 and December 2005, Genentech licensed
exclusive rights to use our maytansinoid TAP technology with antibodies to
three
undisclosed targets. Under the terms defined in the 2000 “access” agreement, we
received a $1.0 million license fee for each license, and is entitled to receive
$38 million in milestone payments; we are also entitled to receive royalties
on
the sales of any resulting products. Genentech is responsible for the
development, manufacturing, and marketing of any products resulting from these
licenses.
In-Licenses
From
time
to time we may in-license certain rights to targets or technologies, in
conjunction with our internal efforts to develop both TAP and naked antibody
products and related technologies. In exchange, we may be obligated to pay
upfront fees, potential milestone payments and royalties on any product
sales.
Other
Licenses
We
also
have licenses with third parties, including other companies and academic
institutions, to gain access to techniques and materials for drug discovery
and
product development and the rights to use those techniques and materials to
make
our products. These licenses include rights to certain antibodies, software
used
in antibody development and apoptosis technology.
Other
Agreements
BioInvent
International AB
In
June
2001, we entered into a monoclonal antibody supply agreement with BioInvent
International AB. Under the terms of the agreement, BioInvent agreed to perform
process qualification and manufacture one of our monoclonal antibodies pursuant
to the cGMP requirements. Under the terms of the agreement, we pay a stated
price per gram of antibody, adjustable based upon production
volumes.
In
December 2002, we entered into an additional supply agreement with
BioInvent to produce a second monoclonal antibody. The monoclonal antibody
that
is the subject of the second agreement is a component of one of the products
we
licensed to sanofi-aventis. As further discussed in Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of
Operation,
sanofi-aventis
reimbursed us for $1.3 million, the full cost of the monoclonal antibody
produced under this agreement. The $1.3 million was included in Other Income
for
the quarter and year ended June 30, 2004.
In
June
2006, we entered into an additional supply agreement with BioInvent to produce
additional quantities of a monoclonal antibody pursuant to the cGMP
requirements. Under the terms of the agreement, we agreed to pay a stated price
per manufactured batch of antibody, subject to adjustment as set forth in the
agreement.
Diosynth
RTP,
Inc.
In
August
2005, we entered into a bioprocessing services agreement with Diosynth RTP,
Inc.
Under the terms of the agreement, Diosynth agreed to perform technology
transfer, process development and scale-up of the antibody component of one
of
our product candidates pursuant to the cGMP requirements. Under the terms of
the
agreement, ImmunoGen shall pay Diosynth a stated price for the technology
transfer and process development.
Laureate
Pharma, L.P.
In
April
2004, we entered into a monoclonal antibody supply agreement with Laureate
Pharma, L.P. Under the terms of the agreement, Laureate agreed to perform
process qualification and manufacture one of our monoclonal antibodies pursuant
to the cGMP requirements. Under the terms of the agreement, we pay a stated
price per manufactured batch of antibody, subject to adjustment as set forth
in
the agreement.
In
December 2005, we entered into a second monoclonal antibody supply agreement
with Laureate to produce additional quantities of the monoclonal antibody
pursuant to cGMP requirements. Under the terms of the agreement, we pay a stated
price per manufactured batch of antibody, subject to adjustment as set forth
in
the second agreement.
Società
Italiana Corticosteroidi S.r.l (SICOR)
Effective
November 2004, we entered into a technology transfer and development agreement
with SICOR. Under the terms of the agreement, SICOR agreed to perform a
feasibility study and full process development work to produce DM1, a component
of our TAP products. Under the terms of the agreement, we agreed to pay SICOR
a
stated price for work performed based on achievement of certain milestone
events. On June 21, 2006, we amended the 2004 technology transfer and
development agreement with SICOR. Under the terms of the amendment, SICOR also
provides preparatory activities in order to scale-up the production of
ansamitocin P3, a precursor to DMx compounds, in anticipation of large-scale
production of ansamitocin P3 and DMx compounds to be used in TAP compounds
for
later-stage clinical trials and commercialization.
Patents,
Trademarks and Trade Secrets
We
seek
patent protection for our proprietary technologies, product candidates, and
related innovations in the United States, Europe, Japan and elsewhere. Patents
that have been issued to us in the United States include the following: claiming
a process for the preparation of certain maytansinoids; claiming methods of
preparation of conjugates composed of maytansinoids and cell-binding agents;
claiming composition and use of novel taxanes; claiming conjugates composed
of
taxanes and cell-binding agents; and a method of antibody humanization. In
many
cases, we have received comparable patents outside the United
States.
We
have
also submitted additional patent applications in the United States, Europe,
Japan, and elsewhere covering proprietary small drug derivatives, methods of
attachment to antibodies, TAP compounds, antibody compounds and use of some
of
these product candidates and inventions for certain diseases. We expect that
our
work will also lead to other patent applications. In all such cases, we will
either be the assignee or owner of such patents or have an exclusive license
to
the technology covered by the patents. We cannot provide assurance, however,
that the patent applications will issue as patents or that any patents, if
issued, will provide us with adequate protection against competitors with
respect to the covered products, technologies or processes.
In
addition, many of the processes and much of the know-how that are important
to
us depend upon the skills, knowledge and experience of our key scientific and
technical personnel, which skills, knowledge and experience are not patentable.
To protect our rights in these areas, we require that all employees,
consultants, advisors and collaborators enter into confidentiality agreements
with us. We cannot provide assurance, however, that these agreements will
provide adequate or any meaningful protection for our trade secrets, know-how
or
other proprietary information in the event of any unauthorized use or disclosure
of such trade secrets, know-how or proprietary information. Further, in the
absence of patent protection, we may be exposed to competitors who independently
develop substantially equivalent technology or otherwise gain access to our
trade secrets, know-how or other proprietary information.
Competition
We
focus
on highly competitive areas of product development. Our competitors include
major pharmaceutical companies and other biotechnology firms. Many of these
companies and institutions also compete with us in recruiting highly qualified
scientific personnel. Many competitors and potential competitors have
substantially greater scientific, research and product development capabilities,
as well as greater financial, marketing and human resources than we do. In
addition, many specialized biotechnology firms have formed collaborations with
large, established companies to support the research, development and
commercialization of products that may be competitive with ours.
In
particular, competitive factors within the antibody and cancer therapeutic
market include:
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the
safety and efficacy of products;
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the
timing of regulatory approval and commercial
introduction;
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special
regulatory
designation of products, such as Orphan Drug designation;
and
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the
effectiveness of marketing and sales
efforts.
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Our
competitive position depends on our ability to develop effective proprietary
products, implement clinical development, production and marketing plans,
including collaborations with other companies with greater marketing resources
than ours, obtain patent protection and secure sufficient capital
resources.
Continuing
development of
conventional and targeted chemotherapeutics by large pharmaceutical companies
and biotechnology companies may result in new compounds that may compete with
our product candidates. In addition, monoclonal antibodies developed by certain
of these companies have been approved for use as cancer therapeutics. In the
future, additional monoclonal antibodies may compete with our product
candidates.
Because
of the prevalence of combination therapy in cancer and the variety of genes
and
targets implicated in cancer incidence and progression, we believe that products
resulting from applications of new technologies may be complementary to our
own.
Such
new
technologies include, but are not limited to:
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the
use of genomics technology to identify new gene-based targets for
the
development of anticancer drugs;
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the
use of high-throughput screening to identify and optimize lead
compounds;
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the
use of gene therapy to deliver genes to regulate gene function;
and
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the
use of therapeutic vaccines.
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Regulatory
Matters
Our
product candidates are regulated in the United States by the FDA in accordance
with the United States Federal Food, Drug, and Cosmetic Act, as well as the
Public Health Service Act. We expect that huC242-DM4, huN901-DM1 and other
of
our TAP compounds will be reviewed by the FDA's Center for Drug Evaluation
and
Research, or CDER. In addition, each drug manufacturer in the United States
must
be registered with the FDA.
The
steps
required before a new drug may be marketed in the United States
include:
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(1)
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Performance
of
preclinical laboratory, animal, and formulation
studies;
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(2)
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The
submission to the FDA of an Investigational New Drug Application,
which
must become effective before clinical trials may
commence;
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(3)
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The
completion of adequate and well-controlled human clinical trials
to
establish the safety and efficacy of the
drug;
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(4)
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The
submission of a New Drug Application to and its acceptance by the
FDA;
and
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(5)
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FDA
approval of the New Drug Application, including approval of product
labeling and advertising.
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Even
if we, or our partners, obtain regulatory approvals for our product candidates,
the Company, our products, and the facilities in which our products are
manufactured are subject to continual review and periodic inspection. The FDA
will require post-marketing reporting to monitor the safety of our products.
Manufacturing establishments are subject to periodic inspections by the FDA
and
must comply with the FDA's current Good Manufacturing Practice, or cGMP. In
complying with cGMP, manufacturers must expend funds, time and effort in the
areas of production, quality control and recordkeeping to ensure full technical
compliance. The FDA stringently applies regulatory standards for
manufacturing.
The
regulatory considerations that have potential impact on the future marketing
of
our products are summarized below.
Clinical
Trials
Process
Before
a new drug may be sold in the United States and other countries, clinical trials
of the product must be conducted and the results submitted to the appropriate
regulatory agencies for approval.
In
the United States, these clinical trial programs generally involve a three-phase
process. Typically, Phase I trials are conducted in healthy volunteers to
determine the early side-effect profile and the pattern of drug distribution
and
metabolism. In Phase II, trials are conducted in groups of patients afflicted
with the target disease to determine preliminary efficacy and optimal dosages
and to expand the safety profile. In Phase III, large-scale comparative trials
are conducted in patients with the target disease to provide sufficient data
for
the proof of efficacy and safety required by federal regulatory agencies. In
the
case of drugs for cancer and other life-threatening diseases, Phase I human
testing usually is performed in patients with advanced disease rather than
in
healthy volunteers.
We
intend to conduct clinical trials not only in accordance with FDA regulations,
but also within guidelines established by other applicable agencies and
committees. Whether or not FDA approval has been obtained, approval of a product
by the comparable regulatory authorities of foreign countries must be obtained
prior to the commencement of marketing of the product in those countries.
Regulatory approval in other countries is obtained through the various
regulatory bodies governing pharmaceutical sales in those individual countries.
We intend to rely on foreign licensees to obtain regulatory approvals to market
our products in foreign countries.
Regulatory
approval takes a number of years and involves the expenditure of substantial
resources. Approval times also depend on a number of factors including, but
not
limited to, the severity of the disease in question, the availability of
alternative treatments and the risks and benefits demonstrated in clinical
trials.
Orphan
Drug
Designation
The
Orphan Drug Act of 1983 generally provides incentives to biotechnology and
pharmaceutical companies to undertake development and marketing of products
to
treat relatively rare diseases or diseases affecting fewer than 200,000 persons
in the United States at the time of application for Orphan Drug
designation.
We
may pursue this designation with respect to products intended for qualifying
patient populations. A drug that receives Orphan Drug designation and is the
first product of its kind to receive FDA marketing approval for its product
claim is entitled to a seven-year exclusive marketing period in the United
States for that product claim.
New
Drugs for Serious or Life-Threatening Illnesses
The
FDA Modernization Act allows the designation of "Fast Track" status to expedite
development of new drugs, including review and approvals, and is intended to
speed the availability of new therapies to desperately ill patients. "Fast
Track" procedures permit early consultation and commitment from the FDA
regarding preclinical and clinical studies necessary to gain marketing approval.
We may seek "Fast Track" status for some, or all, of our products.
"Fast
Track" status also incorporates initiatives announced by the President of the
United States and the FDA Commissioner in March 1996 intended to provide
cancer patients with faster access to new cancer therapies. One of these
initiatives states that the initial basis for approval of anticancer agents
to
treat refractory, hard-to-treat cancer may be objective evidence of response,
rather than statistically improved disease-free and/or overall survival, as
had
been common practice. The sponsor of a product approved under this accelerated
mechanism is required to follow up with further studies on clinical safety
and
effectiveness in larger groups of patients.
Research
and
Development Spending
During
each of the three years ended June 30, 2006, 2005 and 2004, we spent
approximately $40.9 million, $30.5 million and $21.7 million,
respectively, on research and development activities. During the year ended
June
30, 2006, approximately 58% of our full-time equivalent
research and development personnel were dedicated to our sanofi-aventis
collaboration compared to 60% during the years ended June 30, 2005 and
2004.
Employees
As
of June 30, 2006, we had 192 full-time employees, of whom 152 were engaged
in
research and development activities. Eighty-four employees hold post-graduate
degrees, of which 53 hold Ph.D. degrees and 5 hold M.D. degrees. We consider
our
relations with our employees to be good. None of our employees is covered by
a
collective bargaining agreement.
We
have entered into confidentiality agreements with all of our employees, members
of the Board of Directors and consultants.
THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THOSE THAT WE CURRENTLY BELIEVE
MAY MATERIALLY AFFECT OUR COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES THAT
WE ARE UNAWARE OF OR THAT WE CURRENTLY DEEM IMMATERIAL ALSO MAY BECOME
IMPORTANT FACTORS THAT AFFECT OUR COMPANY.
If
our TAP technology does not produce safe, effective and commercially viable
products, our business will be severely harmed.
Our
TAP
technology yields novel anticancer product candidates for the treatment of
cancer. No TAP product candidate has obtained regulatory approval and all of
them are in early stages of development. The most advanced TAP product
candidates are only in the Phase I or Phase I/II stage of clinical trials.
Our
TAP product candidates or our collaborators’ TAP product candidates may not
prove to be safe, effective or commercially viable treatments for cancer and
our
TAP technology may not result in any future meaningful benefits to us or for
our
current or potential collaborative partners. Furthermore, we are aware of only
one antibody-drug conjugate that has obtained FDA approval and is based on
technology similar to our TAP technology. If our TAP technology fails to
generate product candidates that are safe, effective and commercially viable
treatments for cancer, or fails to obtain FDA approval, our business will be
severely harmed.
Clinical
trials for our product candidates will be lengthy and expensive and their
outcome is uncertain.
Before
obtaining regulatory approval for the commercial sale of any product candidates,
we and our collaborative partners must demonstrate through clinical testing
that
our product candidates are safe and effective for use in humans. Conducting
clinical trials is a time-consuming, expensive and uncertain process and
typically requires years to complete. Our most advanced product candidates
are
only in the Phase I or Phase I/II stage of clinical trials. In our industry,
the
results from preclinical testing and early clinical trials often are not
predictive of results obtained in later clinical trials. Some compounds that
have shown promising results in preclinical or early clinical trials
subsequently fail to establish sufficient safety and efficacy data necessary
to
obtain regulatory approval. At any time during the clinical trials, we, our
collaborative partners, or the FDA might delay or halt any clinical trials
for
our product candidates for various reasons, including:
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occurrence
of unacceptable toxicities or side effects;
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ineffectiveness
of the product candidate;
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insufficient
drug supply;
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negative
or inconclusive results from the clinical trials, or results that
necessitate additional clinical
studies;
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delays
in obtaining or maintaining required approvals from institutions,
review
boards or other reviewing entities at clinical
sites;
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delays
in patient enrollment; or
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other
reasons that are internal to the businesses of our collaborative
partners,
which they may not share with us.
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The
results of clinical trials may fail to demonstrate the safety or effectiveness
of our product candidates or our collaborators’ product candidates to the extent
necessary to obtain regulatory approval or to make the commercialization of
the
product worthwhile. Any failure or substantial delay in successfully completing
clinical trials and obtaining regulatory approval for our product candidates
or
our collaborators’ product candidates could severely harm our
business.
If
our collaborative partners fail to perform their obligations under our
agreements, or determine not to continue with clinical trials
for particular product candidates, our business could be severely
impacted.
Our
strategy for the development and commercialization of our product candidates
depends, in large part, upon the formation and maintenance of collaborative
arrangements. Collaborations provide an opportunity for us to:
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generate
cash flow and revenue;
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offset
some of the costs associated with our internal research and development,
preclinical testing, clinical trials and
manufacturing;
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seek
and obtain regulatory approvals faster than we could on our
own;
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successfully
commercialize existing and future product
candidates;
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gain
use of our technology with antibodies that are proprietary to other
companies;
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secure
access to targets which, due to intellectual property restrictions,
would
otherwise be unavailable to our
technology.
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If
we fail
to secure or maintain successful collaborative arrangements, the development
and
marketing of compounds that use our technology may be delayed, scaled back,
or
otherwise may not occur. In addition, we may be unable to negotiate other
collaborative arrangements or, if necessary, modify our existing arrangements
on
acceptable terms. We cannot control the amount and timing of resources our
partners may devote to our products. Our partners may separately pursue
competing products, therapeutic approaches or technologies to develop treatments
for the diseases targeted by us or our collaborative efforts, or may decide
for
reasons not known to us to discontinue development of products under our
agreements with them. Any of
our partners may
slow or discontinue the development of a product covered by a collaborative
arrangement for reasons that can include:
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a
change in the partner’s strategic focus as a result of merger, management
changes, adverse business events, or other causes;
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a
change in the priority of the product relative to other programs
in the
collaborator’s pipeline;
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a
reassessment of the patent situation related to the compound or its
target;
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a
change in the anticipated competition for the product;
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clinical
study
results;
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a
reduction in the financial resources the collaborator can or is willing
to
apply to the development of new compounds and
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Even if our partners continue the collaborative arrangements, they may
nevertheless determine not to actively pursue the development or
commercialization of any resulting products. Also, our partners may fail to
perform their obligations under the collaborative agreements or may be slow
in
performing their obligations. Our partners can terminate our collaborative
agreements under certain conditions. The decision to advance a product that
is
covered by a collaborative agreement through clinical trials and ultimately
to
commercialization is in the discretion of our collaborative partners. If
any collaborative partner were to terminate or breach our agreements, or fail
to
complete its obligations to us in a timely manner, our anticipated revenue
from
the agreement and from the development and commercialization of our products
would be severely limited. If we are not able to establish additional
collaborations or any or all of our existing collaborations are terminated
and
we are not able to enter into alternative collaborations on acceptable terms,
our continued development, manufacture and commercialization of our product
candidates could be delayed or scaled back as we may not have the funds or
capability to continue these activities. If our collaborators fail to
successfully develop and commercialize TAP compounds, our business would be
severely harmed.
We
depend on a small number of collaborators for a substantial portion of our
revenue. The loss of, or a material reduction in activity by, any one of these
collaborators could result in a substantial decline in our
revenue.
We
have
and will continue to have collaborations with a limited number of companies.
As
a result, our financial performance depends on the efforts and overall success
of these companies. Also, the failure of any one of our collaborative partners
to perform its obligations under its agreement with us, including making any
royalty, milestone or other payments to us, could have a material adverse
effect on our financial condition. Further, any material reduction by any one
of
our collaborative partners in its level of commitment of resources, funding,
personnel, and interest in continued development under its agreement with us
could have a material adverse effect on our financial condition. If
consolidation trends in the healthcare industry continue, the number of our
potential collaborators could decrease, which could have an adverse impact
on
our development efforts. If a present or future collaborator of ours were to
be
involved in a business combination, its continued pursuit and emphasis on our
product development program could be delayed, diminished or
terminated.
If
our collaborators’ requirements for clinical materials to be manufactured by us
are significantly lower than we have estimated, our financial results and
condition could be adversely affected.
We
procure
certain components of finished conjugate, including ansamitocin P3, DM1, DM4,
and linker, on behalf of our collaborators. In order to meet our
commitments to our collaborators, we are required to enter into agreements
with
third parties to produce these components well in advance of our production
of
clinical materials on behalf of our collaborators. If our collaborators do
not require as much clinical material as we have contracted to produce, we
may
not be able to recover our investment in these components and we may suffer
significant losses. For example, in February 2005, Boehringer Ingelheim
discontinued development of bivatuzumab mertansine and in January 2006,
Millennium discontinued development of MLN2704. In the periods subsequent to
discontinuation of development, we can have significantly reduced demand for
conjugated material. Specifically, the discontinuation of bivatuzumab mertansine
has contributed to the decrease in clinical materials reimbursement in the
year
ended June 30, 2006.
In
addition, we operate a conjugate manufacturing facility. A significant
portion of the cost of operating this facility, including the cost of
manufacturing personnel, is charged to the cost of producing clinical materials
on behalf of our collaborators. If we produce fewer batches of clinical
materials for our collaborators, less of the cost of operating the conjugate
manufacturing facility will be charged to our collaborators and our financial
condition could be adversely affected.
We
have a history of operating losses and expect to incur significant additional
operating losses.
We
have
generated operating losses since our inception. As of June 30, 2006, we had
an
accumulated deficit of $238.6 million. For the years ended June 30, 2006,
2005, and 2004, we generated losses of $17.8 million, $11.0 million and $5.9
million, respectively. We may never be profitable. We expect to incur
substantial additional operating expenses over the next several years as our
research, development, preclinical testing, clinical studies and collaborator
support activities increase. We intend to continue to invest significantly
in
our product candidates. Further, we expect to invest significant resources
supporting our existing collaborators as they work to develop, test and
commercialize TAP and other antibody compounds, and we or our collaborators
may
encounter technological or regulatory difficulties as part of this development
and commercialization process that we cannot overcome or remedy. We may
also incur substantial marketing and other costs in the future if we decide
to
establish marketing and sales capabilities to commercialize our product
candidates. None of our product candidates has generated any commercial revenue
and our only revenues to date have been primarily from upfront and milestone
payments, research and development support and clinical materials reimbursement
from our collaborative partners. We do not expect to generate revenues from
the
commercial sale of our product candidates for several years, and we may never
generate revenues from the commercial sale of products. Even if we do
successfully develop products that can be marketed and sold commercially, we
will need to generate significant revenues from those products to achieve and
maintain profitability. Even if we do become profitable, we may not be able
to
sustain or increase profitability on a quarterly or annual basis.
We
and our collaborative partners are subject to extensive government regulations
and we and our collaborative partners may not be able to obtain necessary
regulatory approvals.
We
and our
collaborative partners may not receive the regulatory approvals necessary to
commercialize our product candidates, which would cause our business to be
severely harmed. Pharmaceutical product candidates, including those in
development by us and our collaborative partners, are subject to extensive
and
rigorous government regulation. The FDA regulates, among other things, the
development, testing, manufacture, safety, record-keeping, labeling, storage,
approval, advertising, promotion, sale and distribution of pharmaceutical
products. If our potential products or our collaborators’ potential products are
marketed abroad, they will also be subject to extensive regulation by foreign
governments. None of our product candidates has been approved for sale in the
United States or any foreign market. The regulatory review and approval process,
which includes preclinical studies and clinical trials of each product
candidate, is lengthy, complex, expensive and uncertain. Securing FDA approval
requires the submission of extensive preclinical and clinical data and
supporting information to the FDA for each indication to establish the product
candidate’s safety and efficacy. Data obtained from preclinical and clinical
trials are susceptible to varying interpretation, which may delay, limit or
prevent regulatory approval. The approval process may take many years to
complete and may involve ongoing requirements for post-marketing studies. In
light of the limited regulatory history of monoclonal antibody-based
therapeutics, regulatory approvals for our products may not be obtained without
lengthy delays, if at all. Any FDA or other regulatory approvals of our product
candidates, once obtained, may be withdrawn. The effect of government regulation
may be to:
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delay
marketing of potential products for a considerable period of
time;
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limit
the indicated uses for which potential products may be
marketed;
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impose
costly requirements on our activities;
and
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place
us at a competitive disadvantage to other pharmaceutical and biotechnology
companies.
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We
may
encounter delays or rejections in the regulatory approval process because of
additional government regulation from future legislation or administrative
action or changes in FDA policy during the period of product development,
clinical trials and FDA regulatory review. Failure to comply with FDA or other
applicable regulatory requirements may result in criminal prosecution, civil
penalties, recall or seizure of products, total or partial suspension of
production or injunction, as well as other regulatory action against our product
candidates or us. Outside the United States, our ability to market a product
is
contingent upon receiving clearances from the appropriate regulatory
authorities. The foreign regulatory approval process includes similar risks
to
those associated with the FDA approval process. In addition, we are, or may
become, subject to various federal, state and local laws, regulations and
recommendations relating to safe working conditions, laboratory and
manufacturing practices, the experimental use of animals and the use and
disposal of hazardous substances, including radioactive compounds and infectious
disease agents, used in connection with our research work. If we fail to comply
with the laws and regulations pertaining to our business, we may be subject
to
sanctions, including the temporary or permanent suspension of operations,
product recalls, marketing restrictions and civil and criminal
penalties.
Our
product candidates and our collaborators’ product candidates will remain subject
to ongoing regulatory review even if they receive marketing approval. If we
or
our collaborators fail to comply with continuing regulations, we could lose
these approvals and the sale of our products could be
suspended.
Even
if we
receive regulatory approval to market a particular product candidate, the
approval could be conditioned on us conducting costly post-approval studies
or
could limit the indicated uses included in our labeling. Moreover, the product
may later cause adverse effects that limit or prevent its widespread use, force
us to withdraw it from the market or impede or delay our ability to obtain
regulatory approvals in additional countries. In addition, the manufacturer
of
the product and its facilities will continue to be subject to FDA review and
periodic inspections to ensure adherence to applicable regulations. After
receiving marketing approval, the manufacturing, labeling, packaging, adverse
event reporting, storage, advertising, promotion and record-keeping related
to
the product remain subject to extensive regulatory requirements. We may be
slow
to adapt, or we may never adapt, to changes in existing regulatory requirements
or adoption of new regulatory requirements.
If
we fail
to comply with the regulatory requirements of the FDA and other applicable
United States and foreign regulatory authorities, or if previously unknown
problems with our products, manufacturers or manufacturing processes are
discovered, we could be subject to administrative or judicially imposed
sanctions, including:
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restrictions
on the products, manufacturers or manufacturing
processes;
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civil
or criminal penalties;
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product
seizures or detentions;
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voluntary
or mandatory product recalls and publicity
requirements;
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suspension
or withdrawal of regulatory
approvals;
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total
or partial suspension of production;
and
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refusal
to approve pending applications for marketing approval of new drugs
or
supplements to approved
applications.
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We
rely on two
third-party manufacturers to perform separate activities in the process of
producing supplies of our cell-killing agents, DM1 and DM4. Significant problems
at either of these manufacturers could negatively impact the development of
our
own compounds and those of our collaborators.
We
rely
on third-party suppliers to manufacture materials used to make TAP compounds.
Our cell-killing agents DM1 and DM4 (collectively “DMx”) are manufactured from a
precursor, ansamitocin P3. As part of preparing to produce TAP compounds for
later-stage clinical trials and commercialization, we are in the process of
transitioning from our original supplier of ansamitocin P3 to a larger company
with more commercial production experience. We believe we have ample inventory
of ansamitocin P3 in place to meet the anticipated demands by us and our
partners during the transition period. Should there be a serious problem with
the transition to the new vendor, however, we would not be able to immediately
obtain material from our original supplier and our ability to produce TAP
compounds could be significantly impacted, which may impact our and our
collaborators’ product development activities including clinical testing. We
also use a single supplier to convert ansamitocin P3 to DMx. Any
problems experienced by this vendor could
result in a delay or interruption in the supply of DMx to us until this vendor
cures the problem or until we locate an alternative source of supply. Any delay
or interruption in our supply of DMx could lead to a delay or interruption
in
our manufacturing operations and preclinical and clinical trials of our product
candidates and our collaborators’ product candidates, which could negatively
affect our business. We are currently working with a potential additional
supplier to develop the capabilities to supply these materials. We cannot assume
that we will be able to reach agreement with this supplier on acceptable terms,
or at all.
Unfavorable
pricing regulations, third-party reimbursement practices or healthcare reform
initiatives applicable to our product candidates could limit our potential
product revenue.
Antibody-based
anticancer
products are often much more costly to produce than traditional
chemotherapeutics and tend to have significantly higher prices. Factors that
help justify the price include the high mortality associated with many types
of
cancer and the need for more and better treatment options.
Regulations
governing drug
pricing and reimbursement vary widely from country to country. Some countries
require approval of the sales price of a drug before it can be marketed. Some
countries restrict the physicians that can authorize the use of more expensive
medications. Some countries establish treatment guidelines to help limit the
use
of more expensive therapeutics and the pool of patients that receive them.
In
some countries, including the United States, third-party payers frequently
seek
discounts from list prices and are increasingly challenging the prices charged
for medical products. Because
our product candidates are in the development stage, we do not know the level
of
reimbursement, if any, we will receive for any products that we are able to
successfully develop. If the reimbursement for any of our product candidates
is
inadequate in light of our development and other costs, our ability to achieve
profitability would be affected.
We
believe
that the efforts of governments and third-party payors to contain or reduce
the
cost of healthcare will continue to affect the business and financial condition
of pharmaceutical and biopharmaceutical companies. A number of legislative
and
regulatory proposals to change the healthcare system in the United States and
other major healthcare markets have been proposed and adopted in recent years.
For example, the United States Congress enacted a limited prescription drug
benefit for Medicare recipients as part of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003. While the program established by
this
statute may increase demand for any products that we are able to successfully
develop, if we participate in this program, our prices will be negotiated with
drug procurement organizations for Medicare beneficiaries and are likely to
be
lower than prices we might otherwise obtain. Non-Medicare third-party drug
procurement organizations may also base the price they are willing to pay on
the
rate paid by drug procurement organizations for Medicare beneficiaries. In
addition, ongoing initiatives in the United States have and will continue to
increase pressure on drug pricing. The announcement or adoption of any such
initiative could have an adverse effect on potential revenues from any product
candidate that we may successfully develop.
We
may be unable to establish the manufacturing capabilities necessary to develop
and commercialize our potential products.
Currently,
we have only a conjugate manufacturing facility that we use to manufacture
conjugated compounds for us and our collaborators for preclinical and initial
clinical testing. We do not currently have the manufacturing capacity needed
to
make our product candidates for commercial sale. In addition, our manufacturing
capacity may be insufficient to complete all clinical trials contemplated by
us
and our collaborators over time. We intend to rely in part on third-party
contract manufacturers to produce sufficiently large quantities of drug
materials that are and will be needed for clinical trials and commercialization
of our potential products and are putting in place these suppliers. Third-party
manufacturers may not be able to meet our needs with respect to timing, quantity
or quality of materials. If we are unable to contract for a sufficient supply
of
needed materials on acceptable terms, or if we should encounter delays or
difficulties in our relationships with manufacturers, our clinical trials may
be
delayed, thereby delaying the submission of product candidates for regulatory
approval and the market introduction and subsequent commercialization of our
potential products. Any such delays may lower our revenues and potential
profitability.
We
may
develop our manufacturing capacity in part by expanding our current facilities
or building new facilities. Either of these activities would require substantial
additional funds and we would need to hire and train significant numbers of
employees to staff these facilities. We may not be able to develop manufacturing
facilities that are sufficient to produce drug materials for clinical trials
or
commercial use. We and any third-party manufacturers that we may use must
continually adhere to current Good Manufacturing Practice regulations enforced
by the FDA through its facilities inspection program. If our facilities or
the
facilities of third-party manufacturers cannot pass a pre-approval plant
inspection, the FDA will not grant approval to our product candidates. In
complying
with
these
regulations and foreign regulatory requirements, we and any of our third-party
manufacturers will be obligated to expend time, money and effort on production,
record-keeping and quality control to assure that our potential products meet
applicable specifications and other requirements. If we or any third-party
manufacturer with whom we may contract fail to maintain regulatory compliance,
we or the third party may be subject to fines and/or manufacturing operations
may be suspended.
We
have only one conjugate manufacturing facility and any prolonged and significant
disruption at that facility could impair our ability to manufacture products
for
clinical testing.
Currently,
we are contractually obligated to manufacture Phase I and non-pivotal Phase
II
clinical products for companies licensing our TAP technology. We
manufacture this material in a conjugate manufacturing facility. We only
have one such manufacturing facility in which we can manufacture clinical
products. Our current manufacturing facility contains highly specialized
equipment and utilizes complicated production processes developed over a number
of years that would be difficult, time-consuming and costly to duplicate. Any
prolonged disruption in the operations of our manufacturing facility would
have
a significant negative impact on our ability to manufacture products for
clinical testing on our own and would cause us to seek additional third-party
manufacturing contracts, thereby increasing our development costs. Even though
we carry business interruption insurance policies, we may suffer losses as
a
result of business interruptions that exceed the coverage available or any
losses may be excluded under our insurance policies. Certain events, such as
natural disasters, fire, political disturbances, sabotage or business accidents,
which could impact our current or future facilities, could have a significant
negative impact on our operations by disrupting our product development efforts
until such time as we are able to repair our facility or put in place
third-party contract manufacturers to assume this manufacturing
role.
Any
inability to license from third parties their proprietary technologies or
processes which we use in connection with the development and manufacture of
our
product candidates may impair our business.
Other
companies, universities and research institutions have or may obtain patents
that could limit our ability to use, manufacture, market or sell our product
candidates or impair our competitive position. As a result, we would have to
obtain licenses from other parties before we could continue using,
manufacturing, marketing or selling our potential products. Any necessary
licenses may not be available on commercially acceptable terms, if at all.
If we
do not obtain required licenses, we may not be able to market our potential
products at all or we may encounter significant delays in product development
while we redesign products or methods that are found to infringe on the patents
held by others.
We
may be unable to establish sales and marketing capabilities necessary to
successfully commercialize our potential products.
We
currently have no direct sales or marketing capabilities. We anticipate relying
on third parties to market and sell most of our primary product candidates.
If
we decide to market our potential products through a direct sales force, we
would need either to hire a sales force with expertise in pharmaceutical sales
or to contract with a third party to provide a sales force which meets our
needs. We may be unable to establish marketing, sales and distribution
capabilities necessary to commercialize and gain market acceptance for our
potential products and be competitive. In addition, co-promotion or other
marketing arrangements with third parties to commercialize potential products
could significantly limit the revenues we derive from these potential products,
and these third parties may fail to commercialize our compounds
successfully.
If
our product candidates or those of our collaborators do not gain market
acceptance, our business will suffer.
Even
if
clinical trials demonstrate the safety and efficacy of our product candidates
and the necessary regulatory approvals are obtained, our product candidates
may
not gain market acceptance among physicians, patients, healthcare payors and
other members of the medical community. The degree of market acceptance of
any
product candidates that we develop will depend on a number of factors,
including:
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their
degree of clinical efficacy and
safety;
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their
advantage over alternative treatment
methods;
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our/the
marketer’s ability to gain acceptable reimbursement and the reimbursement
policies of government and third-party payors;
and
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the
quality of the distribution capabilities for product candidates,
both ours
and our collaborative partners.
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Physicians
may not prescribe any of our future products until such time as clinical data
or
other factors demonstrate the safety and efficacy of those products as compared
to conventional drug and other treatments. Even if the clinical safety and
efficacy of therapies using our products is established, physicians may elect
not to recommend the therapies for any number of other reasons, including
whether the mode of administration of our products is effective for certain
conditions, and whether the physicians are already using competing products
that
satisfy their treatment objectives. Physicians, patients, third-party payors
and
the medical community may not accept and use any product candidates that we,
or
our collaborative partners, develop. If our products do not achieve significant
market acceptance and use, we will not be able to recover the significant
investment we have made in developing such products and our business will be
severely harmed.
We
may be unable to compete successfully.
The
markets in which we compete are well established and intensely competitive.
We
may be unable to compete successfully against our current and future
competitors. Our failure to compete successfully may result in pricing
reductions, reduced gross margins and failure to achieve market acceptance
for
our potential products. Our competitors include pharmaceutical companies,
biotechnology companies, and research institutions. Many of these organizations
have substantially more experience and more capital, research and development,
regulatory, manufacturing, sales, marketing, human and other resources than
we
do. As a result, they may:
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develop
products that are safer or more effective than our product
candidates;
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obtain
FDA and other regulatory approvals or reach the market with their
products
more rapidly than we can, reducing the potential sales of our product
candidates;
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devote
greater resources to market or sell their
products;
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adapt
more quickly to new technologies and scientific
advances;
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initiate
or withstand substantial price competition more successfully than
we
can;
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have
greater success in recruiting skilled scientific workers from the
limited
pool of available talent;
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more
effectively negotiate third-party licensing and collaboration
arrangements; and
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take
advantage of acquisition or other opportunities more readily than
we
can.
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A
number
of pharmaceutical and biotechnology companies are currently developing products
targeting the same types of cancer that we target, and some of our competitors’
products have entered clinical trials or already are commercially available.
In
addition, our product candidates, if approved and commercialized, will compete
against well-established, existing, therapeutic products that are
currently
reimbursed by government health administration authorities, private health
insurers and health maintenance organizations. We face and will continue to
face
intense competition from other companies for collaborative arrangements with
pharmaceutical and biotechnology companies, for relationships with academic
and
research institutions, and for licenses to proprietary technology. In addition,
we anticipate that we will face increased competition in the future as new
companies enter our markets and as scientific developments surrounding
antibody-based therapeutics for cancer continue to accelerate. While we will
seek to expand our technological capabilities to remain competitive, research
and development by others may render our technology or product candidates
obsolete or noncompetitive or result in treatments or cures superior to any
therapy developed by us.
If
we are unable to protect our intellectual property rights adequately, the value
of our technology and our product candidates could be
diminished.
Our
success depends in part on obtaining, maintaining and enforcing our patents
and
other proprietary rights and our ability to avoid infringing the proprietary
rights of others. Patent law relating to the scope of claims in the
biotechnology field in which we operate is still evolving, is surrounded by
a
great deal of uncertainty and involves complex legal, scientific and factual
questions. To date, no consistent policy has emerged regarding the breadth
of
claims allowed in biotechnology patents. Accordingly, our pending patent
applications may not result in issued patents. Although we own several patents,
the issuance of a patent is not conclusive as to its validity or enforceability.
Through litigation, a third party may challenge the validity or enforceability
of a patent after its issuance.
Also,
patents and applications owned or licensed by us may become the subject of
interference proceedings before the United States Patent and Trademark Office
to
determine priority of invention that could result in substantial cost to us.
An
adverse decision in an interference proceeding may result in our loss of rights
under a patent or patent application. It is unclear how much protection,
if any, will be given to our patents if we attempt to enforce them or if they
are challenged in court or in other proceedings. A competitor may successfully
challenge our patents or a challenge could result in limitations of the patents’
coverage. In addition, the cost of litigation or interference proceedings to
uphold the validity of patents can be substantial. If we are unsuccessful in
these proceedings, third parties may be able to use our patented technology
without paying us licensing fees or royalties. Moreover, competitors may
infringe our patents or successfully avoid them through design innovation.
To
prevent infringement or unauthorized use, we may need to file infringement
claims, which are expensive and time-consuming. In an infringement proceeding,
a
court may decide that a patent of ours is not valid. Even if the validity of
our
patents were upheld, a court may refuse to stop the other party from using
the
technology at issue on the ground that its activities are not covered by our
patents. Policing unauthorized use of our intellectual property is difficult,
and we may not be able to prevent misappropriation of our proprietary rights,
particularly in countries where the laws may not protect such rights as fully
as
in the United States.
In
addition to our patent rights, we also rely on unpatented technology, trade
secrets, know-how and confidential information. Third parties may independently
develop substantially equivalent information and techniques or otherwise gain
access to or disclose our technology. We may not be able to effectively protect
our rights in unpatented technology, trade secrets, know-how and confidential
information. We require each of our employees, consultants and corporate
partners to execute a confidentiality agreement at the commencement of an
employment, consulting or collaborative relationship with us. However, these
agreements may not provide effective protection of our information or, in the
event of unauthorized use or disclosure, they may not provide adequate
remedies.
If
we are forced to litigate or undertake other proceedings in order to enforce
our
intellectual property rights, we may be subject to substantial costs and
liability or be prohibited from commercializing our potential
products.
Patent
litigation is very common in the biotechnology and pharmaceutical industries.
Third parties may assert patent or other intellectual property infringement
claims against us with respect to our technologies, products or other matters.
Any claims that might be brought against us alleging to infringement of patents
may cause us to incur significant expenses and, if successfully asserted against
us, may cause us to pay substantial damages and limit our ability to use the
intellectual property subject to these claims. Even if we were to prevail,
any
litigation would be costly and time-consuming and could divert the attention
of
our management and key personnel from our business operations. Furthermore,
as a
result of a patent infringement suit, we may be forced to stop or delay
developing, manufacturing or selling potential products that incorporate the
challenged intellectual property unless we enter into royalty or license
agreements. There may be third-party patents, patent applications and other
intellectual property relevant to our potential products that may block or
compete with our products or processes. In addition, we sometimes undertake
research and development with respect to potential products even when we are
aware of third-party patents that may be relevant to our potential products,
on
the basis that such patents may be challenged or licensed by us. If our
subsequent challenge to such patents were not to prevail, we may not be able
to
commercialize our potential products after having already incurred significant
expenditures unless we are able to license the intellectual property on
commercially reasonable terms. We may not be able to obtain royalty or license
agreements on terms acceptable to us, if at all. Even if we were able to obtain
licenses to such technology, some licenses may be non-exclusive, thereby giving
our competitors access to the same technologies licensed to us. Ultimately,
we
may be unable to commercialize some of our potential products or may have to
cease some of our business operations, which could severely harm our
business.
We
use hazardous materials in our business, and any claims relating to improper
handling, storage or disposal of these materials could harm our
business.
Our
research and development and manufacturing activities involve the controlled
use
of hazardous materials, chemicals, biological materials and radioactive
compounds. We are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of these
materials and certain waste products. Although we believe that our safety
procedures for handling and disposing of these materials comply with the
standards prescribed by applicable laws and regulations, we cannot completely
eliminate the risk of accidental contamination or injury from these materials.
In the event of such an accident, we could be held liable for any resulting
damages, and any liability could exceed our resources. We may be required to
incur significant costs to comply with these laws in the future. Failure to
comply with these laws could result in fines and the revocation of permits,
which could prevent us from conducting our business.
We
face product liability risks and may not be able to obtain adequate
insurance.
The
use of
our product candidates during testing or after approval entails an inherent
risk
of adverse effects, which could expose us to product liability claims.
Regardless of their merit or eventual outcome, product liability claims may
result in:
|
§
|
decreased
demand for our product;
|
|
§
|
injury
to our reputation and significant negative media
attention;
|
|
§
|
withdrawal
of clinical trial volunteers;
|
|
§
|
distraction
of management; and
|
|
§
|
substantial
monetary awards to plaintiffs.
|
We
may not
have sufficient resources to satisfy any liability resulting from these claims.
We currently have $5.0 million of product liability insurance for products
which are in clinical testing. This coverage may not be adequate in scope to
protect us in the event of a successful product liability claim. Further, we
may
not be able to maintain our current insurance or obtain general product
liability insurance on reasonable terms and at an acceptable cost if we or
our
collaborative partners begin commercial production of our proposed product
candidates. This insurance, even if we can obtain and maintain it, may not
be
sufficient to provide us with adequate coverage against potential
liabilities.
We
depend on our key personnel and we must continue to attract and retain key
employees and consultants.
We
depend
on our key scientific and management personnel. Our ability to pursue the
development of our current and future product candidates depends largely on
retaining the services of our existing personnel and hiring additional qualified
scientific personnel to perform research and development. We will also need
to
hire personnel with expertise in clinical testing, government regulation,
manufacturing, marketing and finance. Attracting and retaining qualified
personnel will be critical to our success. We may not be able to attract and
retain personnel on acceptable terms given the competition for such personnel
among biotechnology, pharmaceutical and healthcare companies, universities
and
non-profit research institutions. Failure to retain our existing key management
and scientific personnel or to attract additional highly qualified personnel
could delay the development of our product candidates and harm our
business.
If
we are unable to obtain additional funding when needed, we may have to delay
or
scale back some of our programs or grant rights to third parties to develop
and
market our products.
We
will
continue to expend substantial resources developing new and existing product
candidates, including costs associated with research and development, acquiring
new technologies, conducting preclinical and clinical trials, obtaining
regulatory approvals and manufacturing products as well as providing certain
support to our collaborators in the development of their products. We believe
that our current working capital and future payments, if any, from our
collaboration arrangements, including committed research funding that we expect
to receive from sanofi-aventis pursuant to the terms of our collaboration
agreement, will be sufficient to meet our current and projected operating and
capital requirements for at least the next two to three years. However, we
may need additional financing sooner due to a number of factors
including:
|
§
|
if
either we or any of our collaborators incur higher than expected
costs or
experience slower than expected progress in developing product candidates
and obtaining regulatory approvals;
|
|
§
|
lower
revenues than expected under our collaboration agreements;
or
|
|
§
|
acquisition
of technologies and other business opportunities that require financial
commitments.
|
Additional
funding may not be available to us on favorable terms, or at all. We may raise
additional funds through public or private financings, collaborative
arrangements or other arrangements. Debt financing, if available, may involve
covenants that could restrict our business activities. If we are unable to
raise
additional funds through equity or debt financing when needed, we may be
required to delay, scale back or eliminate expenditures for some of our
development programs or grant rights to develop and market product candidates
that we would otherwise prefer to internally develop and market. If we are
required to grant such rights, the ultimate value of these product candidates
to
us may be reduced.
Our
stock price
can fluctuate significantly and results announced by us and our collaborators
can cause our stock price to decline.
Our
stock
price can fluctuate significantly due to business developments announced by
us
and by our collaborators, as a result of market trends and as a result of our
low stock price. The business developments that could impact our stock price
include disclosures related to clinical findings with compounds that make use
of
our TAP technology, new partnerships, and clinical advancement or
discontinuation of product candidates that make use of our TAP technology.
Our
stock price can also fluctuate significantly with the level of overall
investment interest in small-cap biotechnology stocks.
Our
operating results have fluctuated in the past and are likely to continue to
do
so in the future. Our revenue is unpredictable and may fluctuate due to the
timing of non-recurring licensing fees, decisions of our collaborative partners
with respect to our agreements with them, reimbursement for manufacturing
services, the achievement of milestones and our receipt of the related milestone
payments under new and existing licensing and collaboration agreements. Revenue
historically recognized under our prior collaboration agreements may not be
an
indicator of revenue from any future collaborations. In addition, our expenses
are unpredictable and may fluctuate from quarter to quarter due to the timing
of
expenses, which may include obligations to manufacture or supply product or
payments owed by us under licensing or collaboration agreements. It is possible
that our quarterly operating results will not meet the expectations of
securities analysts or investors, causing the market price of our common stock
to decline. We believe that quarter to quarter comparisons of our operating
results are not good indicators of our future performance and should not be
relied upon to predict the future performance of our stock price.
We
do not intend to pay cash dividends on our common stock.
We
have
not paid cash dividends since our inception and do not intend to pay cash
dividends in the foreseeable future. Therefore, shareholders will have to rely
on appreciation in our stock price, if any, in order to achieve a gain on an
investment.
A
WARNING ABOUT FORWARD-LOOKING STATEMENTS
This
report includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements relate to analyses
and other information which are based on forecasts of future results and
estimates of amounts that are not yet determinable. These statements also relate
to our future prospects, developments and business strategies.
These
forward-looking statements are identified by their use of terms and phrases,
such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,”
“plan,” “predict,” “project,” “will” and other similar terms and phrases,
including references to assumptions. These statements are contained in the
“Business,” “Risk Factors,” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” sections, as well as other
sections of this report.
Forward-looking
statements in this report include, but are not limited to:
§ |
successfully
finding
and managing the relationships with collaborative partners;
|
§ |
the
uncertainty as
to whether our TAP compounds or those of our collaborators will succeed
in
entering human clinical trials and uncertainty as to the results
of such
trials;
|
§ |
the
risk that we
and/or our collaborators may not be able to obtain regulatory approvals
necessary to commercialize product candidates;
|
§ |
the
potential
development by competitors of competing products and technologies;
uncertainty whether our TAP technology will produce safe, effective
and
commercially viable products;
|
§ |
our
ability to successfully protect our intellectual
property;
|
§ |
our
reliance on
third-party manufacturers to achieve supplies of our cell-killing
agents,
DM1 and DM4;
|
§ |
the
risk that we may
be unable to establish the manufacturing capabilities necessary to
develop
and commercialize our potential
products;
|
§ |
the
adequacy of our liquidity and capital
resources;
|
§ |
governmental
regulation of our activities, facilities, products and personnel;
the
dependence on key personnel;
|
§ |
uncertainties
as to
the extent of reimbursement for the costs of our potential products
and
related treatments by government and private health insurers and
other
organizations; the potential adverse impact of government-directed
health
care reform; and
|
§ |
the
risk of product
liability claims; and economic conditions, both generally and those
specifically related to the biotechnology industry.
|
These
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause actual results to be materially different from
those contemplated by our forward-looking statements. These known and unknown
risks, uncertainties and other factors are described in detail in the “Risk
Factors” section and in other sections of this report.
None.
We
lease
approximately 37,700 square feet of laboratory and office space in a building
located at 128 Sidney Street, Cambridge, Massachusetts. The 128 Sidney
Street lease expires on March 31, 2008; however, we have the option,
subject to our landlord’s approval, to extend the lease for an additional
five-year term pursuant to an amendment dated August 29, 2001. We sublease
approximately 15,000 square feet of laboratory and office space in a building
located at 148 Sidney Street, Cambridge, Massachusetts. The 148 Sidney Street
lease expires on October 31, 2010. We sublease approximately 7,000 square
feet of space at 64 Sidney Street, Cambridge, Massachusetts for general and
administrative purposes. The 64 Sidney Street sublease expires on
March 31, 2008. We also lease approximately 35,450 square feet of space in
Norwood, Massachusetts, which serves as the Company’s conjugate manufacturing
facility and office space. The Norwood lease expires on June 30, 2011, but
we have the option to extend the lease for an additional five-year term pursuant
to an amendment dated October 30, 2005. We believe that the manufacturing
portion of the Norwood facility complies with all applicable current Good
Manufacturing Practice regulations of the FDA.
Item
3. Legal
Proceedings
From
time
to time we may be a party to various legal proceedings arising in the ordinary
course of our business. We are not currently subject to any material legal
proceedings.
Item
4. Submission
of Matters to a Vote of Security Holders
No
matters were submitted to a vote of our security holders through solicitation
of
proxies or otherwise during the last quarter of the fiscal year ended
June 30, 2006.
Item
5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Market
Price of
Our Common Stock and Related Stockholder Matters
Our
Common Stock is quoted on the NASDAQ Global Market under the symbol “IMGN.” The
table below sets forth the high and low closing price per share of our Common
Stock as listed on the NASDAQ Global Market:
|
|
Fiscal
Year
2006
|
|
Fiscal
Year
2005
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
First
Quarter
|
|
$
|
7.340
|
|
$
|
5.820
|
|
$
|
6.210
|
|
$
|
4.090
|
Second
Quarter
|
|
$
|
7.290
|
|
$
|
5.120
|
|
$
|
9.390
|
|
$
|
4.940
|
Third
Quarter
|
|
$
|
5.310
|
|
$
|
3.990
|
|
$
|
8.990
|
|
$
|
4.950
|
Fourth
Quarter
|
|
$
|
4.410
|
|
$
|
3.000
|
|
$
|
6.560
|
|
$
|
4.590
|
As
of
August 24, 2006, the closing price per share of our common stock was $3.26,
as reported on the NASDAQ Global Market, and we had approximately 593 holders
of
record of the Company’s common stock and, according to the Company’s estimates,
approximately 16,600 beneficial owners of the Company’s common
stock.
The
Company has not paid any cash dividends on its Common Stock since its inception
and does not intend to pay any cash dividends in the foreseeable
future.
Recent
Sales of Unregistered Securities; Uses of Proceeds from Registered
Securities
None.
Item
6.
Selected Financial Data
The
following table (in thousands, except per share data) sets forth our
consolidated financial data for each of our five fiscal years through our fiscal
year ended June 30, 2006. The information set forth below should be read in
conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and the consolidated financial statements and related
notes included elsewhere in this report on Form 10-K.
|
|
Year
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$
|
32,088
|
|
$
|
35,718
|
|
$
|
25,956
|
|
$
|
7,628
|
|
$
|
5,883
|
|
Total
expenses
|
|
|
53,474
|
|
|
48,395
|
|
|
34,369
|
|
|
32,064
|
|
|
26,268
|
|
Other
income,
net
|
|
|
3,569
|
|
|
1,755
|
|
|
2,542
|
|
|
4,489
|
|
|
5,883
|
|
Income
tax
expense
|
|
|
17
|
|
|
29
|
|
|
46
|
|
|
35
|
|
|
128
|
|
Net
loss
|
|
$
|
(17,834
|
)
|
$
|
(10,951
|
)
|
$
|
(5,917
|
)
|
$
|
(19,982
|
)
|
$
|
(14,630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
net loss per common share
|
|
$
|
(0.43
|
)
|
$
|
(0.27
|
)
|
$
|
(0.15
|
)
|
$
|
(0.48
|
)
|
$
|
(0.37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
weighted average common shares outstanding
|
|
|
41,184
|
|
|
40,868
|
|
|
40,646
|
|
|
41,912
|
|
|
39,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
94,128
|
|
$
|
110,132
|
|
$
|
122,630
|
|
$
|
118,032
|
|
$
|
152,156
|
|
Stockholders’
equity
|
|
|
72,350
|
|
|
86,842
|
|
|
97,137
|
|
|
102,680
|
|
|
134,215
|
|
Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Since
the
Company's inception, we have been principally engaged in the development of
antibody-based anticancer therapeutics. The combination of our expertise in
antibodies and cancer biology has resulted in the development of both
proprietary product candidates and technologies. Our proprietary
Tumor-Activated Prodrug, or TAP, technology combines extremely potent small
molecule cytotoxic agents with monoclonal antibodies that bind specifically
to
cancer cells. Our TAP technology is designed to increase the potency of
tumor-targeting antibodies and kill cancer cells with only modest damage to
healthy tissue. The cytotoxic agents we use in our TAP compounds currently
involved in clinical testing are the maytansinoid DM1 and DM4 molecules,
chemical derivatives of a naturally occurring substance called maytansine.
We
also use our expertise in antibodies and cancer to develop other types of
therapeutics, such as naked-antibody anticancer product candidates.
We
have
entered into collaborative agreements that enable companies to use our TAP
technology to develop commercial product candidates containing their antibodies.
We have also used our proprietary TAP technology in conjunction with our
in-house antibody expertise to develop our own anticancer product
candidates. Under the terms of our collaborative agreements, we are
entitled to upfront fees, milestone payments, and royalties on any commercial
product sales. We are reimbursed our fully burdened costs to manufacture
preclinical and clinical materials and, under certain collaborative agreements,
the reimbursement includes a profit margin. Currently, our collaborative
partners include Amgen, Inc. (formerly Abgenix, Inc.), Biogen Idec,
Boehringer Ingelheim International GmbH, Centocor, Inc.,
Genentech, Inc., Millennium Pharmaceuticals, Inc., and the
sanofi-aventis Group, and most recently, Biotest AG (effective July 7, 2006).
We
expect that substantially all of our revenue for the foreseeable future will
result from payments under our collaborative arrangements.
In
July 2003, we announced a discovery, development and commercialization
collaboration with Aventis Pharmaceuticals, Inc. (now the sanofi-aventis
Group). Under the terms of this agreement, in consideration of an
upfront payment of $12 million sanofi-aventis gained commercialization rights
to
three of the then most advanced product candidates in our preclinical pipeline
and the commercialization rights to certain new product candidates developed
during the research program portion of the collaboration. This collaboration
allows us to access sanofi-aventis' clinical development and commercialization
capabilities. Under the terms of the sanofi-aventis agreement, we also are
entitled to receive committed research funding of approximately
$50.7 million during the initial three-year term of the research program
ending August 31, 2006. In August 2005, sanofi-aventis exercised its contractual
right to extend the term of its research program with the Company and committed
to fund $18.2 million in research support over the twelve months beginning
September 1, 2006. This funding is in addition to the research support already
committed for the three years ending August 31, 2006. Should sanofi-aventis
elect to exercise its contractual right to extend the term of the research
program for the second additional 12-month period, we would receive additional
research funding.
On
January 27, 2006, Genentech notified us that the trastuzumab-DM1 Investigational
New Drug (IND) application submitted by Genentech to the FDA had become
effective. Under the terms of the May 2000 exclusive license agreement for
antibodies to HER2, this event triggered a $2.0 million milestone
payment.
On
January 25, 2006, Millennium Pharmaceuticals, Inc. notified us that, as part
of
its ongoing portfolio management process and based on the evaluation of recent
clinical data in the context of other opportunities in its pipeline, Millennium
had decided not to continue the development of its MLN2704 compound. MLN2704
consists of a Millennium antibody to the Prostate-Specific Membrane Antigen
(PSMA) and our DM1 and was in development by Millennium under a 2002 license
that gave Millennium exclusive rights to use our maytansinoid TAP technology
with antibodies targeting PSMA. Millennium retains its right to use our
maytansinoid TAP technology with antibodies targeting PSMA.
On
March
27, 2006, Millennium extended the agreement that provides Millennium with
certain rights to test our (TAP) technology with antibodies to specific targets
and to license the right to use the technology to develop products on the terms
defined in the agreement. This agreement was scheduled to expire March 30,
2006
unless extended by Millennium. It is now scheduled to expire March 30,
2007. In consideration for this extension, Millennium paid us an extension
fee
equal to $250,000.
In
August 2003, Vernalis completed its acquisition of British Biotech. In
connection with this acquisition, the merged company, called Vernalis plc,
announced that it intended to review its merged product candidate portfolio,
including its collaboration with ImmunoGen on huN901-DM1. After discussion
with
Vernalis, in January 2004 we announced that we would take over further
development of the product candidate. Pursuant to the terms of the termination
agreement executed on January 7, 2004, Vernalis retained responsibility for
the conduct and expense of the study it initiated in the United States (Study
001) until June 30, 2004, and the study it had started in the United Kingdom
(Study 002) through completion. We took over responsibility for Study 001 on
July 1, 2004 and, in September 2005, we announced the initiation of our own
clinical trial with huN901-DM1 in multiple myeloma (Study 003). On December
15,
2005, we executed an agreement to amend the residual obligation terms of the
January 7, 2004 Termination Agreement with Vernalis. Under the terms of the
amendment, we assumed responsibility for Study 002 as of December 15, 2005,
including the cost of its completion. Under the amendment, Vernalis paid us
$365,000 in consideration of the expected cost of the obligations
assumed by us with the amendment. This $365,000 has been recognized as other
income in the accompanying Consolidated Statements of Operations for the year
ended June 30, 2006.
On
January 8, 2004, we announced that we intended to advance cantuzumab
mertansine into human testing to assess the clinical utility of the compound
in
certain indications. In October 2004, we decided to move huC242-DM4 into
clinical trials instead of cantuzumab mertansine (huC242-DM1). We initiated
a
Phase I clinical trial with huC242-DM4 in June 2005.
Based
upon the results of our clinical trials, if and when they are completed, we
will
evaluate whether to continue clinical development of huN901-DM1 and huC242-DM4,
and, if so, whether we will seek a collaborative partner or partners to continue
the clinical development and commercialization of either or both of these
compounds.
To
date,
we have not generated revenues from commercial product sales and we expect
to
incur significant operating losses for the foreseeable future. We do not
anticipate that we will have a commercially approved product within the near
future. Research and development expenses are expected to increase significantly
in the near term as we continue our development efforts, including an expanded
clinical trial program. As of June 30, 2006, we had approximately $75.0 million
in cash and marketable securities. We anticipate that our current capital
resources and future collaboration payments, including the committed research
funding due us under the sanofi-aventis collaboration over the remainder of
the
research program, will enable us to meet our operational expenses and capital
expenditures for at least the next two to three fiscal years.
We
anticipate that the increase in total cash expenditures will be partially offset
by collaboration-derived proceeds, including milestone payments and the
committed research funding to which we are entitled pursuant to the
sanofi-aventis collaboration. Accordingly, period-to-period operational results
may fluctuate dramatically based upon the timing of receipt of the proceeds.
We
believe that our established collaborative agreements, while subject to
specified milestone achievements, will provide funding to assist us in meeting
obligations under our collaborative agreements while also assisting in providing
funding for the development of internal product candidates and
technologies. However, we can give no assurances that such collaborative
agreement funding will, in fact, be realized in the time frames we expect,
or at
all. Should we or our partners not meet some or all of the terms and conditions
of our various collaboration agreements, we may be required to pursue additional
strategic partners, secure alternative financing arrangements, and/or defer
or
limit some or all of our research, development and/or clinical
projects.
Critical
Accounting
Policies
We
prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments that affect
the
reported amounts of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates, including those related to our collaborative agreements
and inventory. We base our estimates on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Actual
results may differ from these estimates.
We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements.
Revenue
Recognition
We
estimate the period of our significant involvement during development for each
of our collaborative agreements. We recognize any upfront fees received from
our
collaborators ratably over this estimated period of significant involvement.
We
generally believe our period of significant involvement occurs between the
date
we sign a collaboration agreement and projected FDA approval of our
collaborator’s product that is the subject of the collaboration agreement. We
estimate that this time period ranges between six and seven and one-half years,
depending on the characteristics of the license. The actual period of our
involvement could differ significantly based upon the results of our
collaborators’ preclinical and clinical trials, competitive products that are
introduced into the market and the general uncertainties surrounding drug
development. Any difference between our estimated period of involvement during
development and our actual period of involvement could have a material effect
upon our results of operations. We assess our period of significant involvement
with each collaboration on a quarterly basis and adjust the period of
involvement prospectively, as appropriate.
We
recognize the $12.0 million upfront fee we received from sanofi-aventis ratably
over our estimated period of significant involvement of five years. This
estimated period includes the initial three-year term of the collaborative
research program, the one 12-month extension sanofi-aventis exercised in August
2005, and one remaining 12-month extension that sanofi-aventis may exercise.
In
the event our period of involvement is less than we estimated, the remaining
deferred balance of the upfront fee will be recognized over this shorter
period.
We
review
our estimates of the net realizable value of our inventory at each reporting
period. Our estimate of the net realizable value of our inventory is
subject to judgment and estimation. The actual net realizable value of our
inventory could vary significantly from our estimates. We consider
quantities of DM1 and DM4, collectively referred to as DMx, and ansamitocin
P3
in excess of 12 month projected usage that is not supported by collaborators'
firm fixed orders and projections to be excess. To date, we have fully reserved
any such material identified as excess with a corresponding charge to research
and development expense. Our collaborators' estimates of their clinical material
requirements are based upon expectations of their clinical trials, including
the
timing, size, dosing schedule and maximum tolerated dose of each clinical
trial. Our collaborators' actual requirements for clinical materials may vary
significantly from their projections. Significant differences between our
collaborators' actual manufacturing orders and their projections could result
in
our actual 12 month usage of DMx and ansamitocin P3 varying significantly from
our estimated usage at an earlier reporting period. In the fiscal year 2006
we did not incur any research and development expenses related to ansamitocin
P3
and DMx inventory that we identified as excess based upon our inventory policy,
and we recorded $153,000 to write down certain P3 and DMx batches and certain
work in process amounts to their net realizable value.
Stock
Compensation
As
of June
30, 2006, the Company has one share-based compensation plan, which is the
ImmunoGen, Inc. Restated Stock Option Plan. Effective July 1, 2005, we adopted
the fair value recognition provisions of Financial Accounting Standards Board
(FASB) Statement 123(R), Share-Based
Payment (Statement
123(R)), using the modified-prospective-transition method. Under that transition
method, compensation cost includes: (a) compensation cost for all share-based
payments granted, but not yet vested as of July 1, 2005, based on the grant-date
fair value estimated in accordance with the original provisions of Statement
123
(as defined below), and (b) compensation cost for all share-based payments
granted subsequent to July 1, 2005, based on the grant-date fair value estimated
in accordance with the provisions of Statement 123(R). Such amounts have
been reduced by the Company’s estimate of forfeitures of all unvested awards.
The
fair
value of each stock option is estimated on the date of grant using the
Black-Scholes option-pricing model. Expected volatility is based exclusively
on
historical volatility data of the Company’s stock. The expected term of stock
options granted is based exclusively on historical data and represents the
period of time that stock options granted are expected to be outstanding. The
expected term is calculated for and applied to one group of stock options as
the
Company does not expect substantially different exercise or post-vesting
termination behavior amongst its employee population. The risk-free rate of
the stock options is based on the United States Treasury rate in effect at
the
time of grant for the expected term of the stock options. The compensation
cost
that has been incurred during the year ended June 30, 2006 is $2.4 million.
Results
of Operations
Revenues
Our
total
revenues for the year ended June 30, 2006 were $32.1 million compared with
$35.7 million and $26.0 million for the years ended June 30, 2005 and
2004, respectively. The $3.6 million decrease in revenues from fiscal 2005
to
fiscal 2006 is primarily attributable to lower revenues from clinical materials
reimbursement, partially offset by higher revenues from research development
support, as well as increases in license and milestone fees, as discussed below.
The $9.8 million increase in revenues from fiscal 2004 to fiscal 2005 is
primarily attributable to higher revenues from clinical materials reimbursement
and research and development support, as well as increases in license and
milestone fees.
Research
and development support was $21.8 million for the year ended June 30, 2006
compared with $18.4 million for the year ended June 30, 2005. These amounts
primarily represent committed research funding earned based on actual resources
utilized under our discovery, development and commercialization agreement with
sanofi-aventis, as well as amounts earned for resources utilized under our
development and license agreements with Biogen Idec, Centocor, and Genentech.
The sanofi-aventis agreement provides that we are entitled to receive a minimum
of $50.7 million of committed research funding during a three-year research
program, with annual amounts to be determined in each of the three research
program years. We entered into the agreement with sanofi-aventis in
July 2003 and initiation of the committed research funding began on
September 1, 2003. At the conclusion of the second sanofi-aventis research
program year on August 31, 2005, a review of research activities during this
period was conducted. This review identified $1.1 million in billable activities
performed under the program during the fiscal year ended June 30, 2005 which
had
not been billed or recorded as revenue. Accordingly, we have included this
additional $1.1 million of research and development support revenue in the
accompanying consolidated statement of operations for the year ended June 30,
2006. Also included in research and development support revenue are fees related
to process development and research work performed by the Company on behalf
of
collaborators, as well as samples of research-grade material shipped to
collaborators. To date, our development fees represent the fully burdened
reimbursement of costs incurred in producing research-grade materials and
developing antibody-specific conjugation processes on behalf of our
collaborators and potential collaborators during the early evaluation and
preclinical testing stages of drug development. The amount of development fees
we earn is directly related to the number of our collaborators and potential
collaborators,
the
stage of development of our collaborators’ products and the resources our
collaborators allocate to the development effort. As such, the amount of
development fees may vary widely from quarter to quarter and year to
year.
Revenue from license and milestone fees for the year ended June 30, 2006
increased approximately $375,000 to $7.2 million from $6.8 million in the year
ended June 30, 2005. Revenue from license and milestone fees for the year
ended June 30, 2004 was $5.5 million. Included in license and
milestone fees for the year ended June 30, 2006 was $2.0 million related to
the
achievement of a milestone under the Genentech agreement from the initiation
of
clinical testing of trastuzumab-DM1, along with amounts earned under the
three-year renewal of the broad access agreement with Genentech. Included in
license and milestone fees for the year ended June 30, 2005 was $2.5
million related to the achievement of milestones under the sanofi-aventis
agreement from the initiation of clinical testing of AVE9633 and for the
preclinical advancement of SAR3419. Total revenue recognized from license and
milestone fees from each of our collaborative partners in the years ended
June 30, 2006, 2005 and 2004 is included in the following table (in
thousands):
|
|
Year
ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
|
|
Collaborative
Partner:
|
|
|
|
|
|
|
|
|
|
|
Amgen
(formerly
Abgenix)
|
|
$
|
400
|
|
$
|
471
|
|
$
|
546
|
|
Biogen
Idec
|
|
|
45
|
|
|
-
|
|
|
-
|
|
Boehringer
Ingelheim
|
|
|
-
|
|
|
97
|
|
|
166
|
|
Centocor
|
|
|
159
|
|
|
83
|
|
|
-
|
|
Genentech
|
|
|
3,639
|
|
|
782
|
|
|
643
|
|
Millennium
|
|
|
508
|
|
|
443
|
|
|
443
|
|
Sanofi-aventis
|
|
|
2,400
|
|
|
4,900
|
|
|
2,000
|
|
Vernalis
|
|
|
-
|
|
|
-
|
|
|
1,750
|
|
Total
|
|
$
|
7,151
|
|
$
|
6,776
|
|
$
|
5,548
|
|
Deferred
revenue of $16.0 million at June 30, 2006 represents payments received from
our collaborators pursuant to our license agreements with them, which we have
yet to earn pursuant to our revenue recognition policy.
Clinical
materials reimbursement decreased by approximately $7.4 million to
$3.1 million in the year ended June 30, 2006 compared to
$10.5 million in the year ended June 30, 2005. We earned clinical
materials reimbursement of $6.6 million during the year ended June 30,
2004. During the years ended June 30, 2006, 2005 and 2004, we shipped
clinical materials in support of the huN901-DM1, bivatuzumab mertansine,
MLN2704, trastuzumab-DM1 and AVE9633 clinical trials, as well as preclinical
materials in support of the development efforts of certain other collaborators.
The decrease in clinical materials reimbursement in fiscal 2006 as compared
to
fiscal 2005 and fiscal 2004 is due to a reduction in demand primarily related
to
clinical material to support the Boehringer Ingelheim and Millennium programs.
The increase in clinical materials reimbursement in fiscal 2005 as compared
to
fiscal 2004 is primarily related to the advancement of the clinical trials
of
bivatuzumab mertansine and MLN2704, along with the initiation of clinical trials
of AVE9633. Under certain collaborative agreements, we are reimbursed for our
fully burdened cost to produce clinical materials plus a profit margin. The
amount of clinical materials reimbursement we earn, and the related cost of
clinical materials reimbursed, is directly related to (i) the number of
on-going clinical trials our collaborators have underway, the speed of
enrollment in those trials, the dosage schedule of each clinical trial and
the
time period, if any, during which patients in the trial receive clinical benefit
from the clinical materials, and (ii) our production of clinical grade
material on behalf of our collaborators, either in anticipation of clinical
trials, or for process development and analytical purposes. As such, the amount
of clinical materials reimbursement and the related cost of clinical materials
reimbursed may vary significantly from quarter to quarter and year to
year.
Research
and Development Expenses
We
report
research and development expense net of certain reimbursements we receive from
our collaborators. Our net research and development expenses relate to
(i) research to identify and evaluate new targets and to develop and
evaluate new antibodies and cytotoxic drugs, (ii) preclinical testing of
our own and, in certain instances, our collaborators' product candidates, and
the cost of our own clinical trials, (iii) development related to clinical
and commercial manufacturing processes and (iv) manufacturing operations.
Our research and development efforts have been primarily focused in the
following areas:
§ |
activities
pursuant to our discovery, development and commercialization agreement
with sanofi-aventis;
|
§ |
activities
related to the preclinical and clinical development of huN901-DM1
and
huC242-DM4;
|
§ |
process
development related to production of the huN901 antibody and huN901-DM1
conjugate for clinical materials;
|
§ |
process
development related to production of the huC242 antibody and huC242-DM4
conjugate for clinical materials;
|
§ |
process
improvements related to the production of DM1, DM4 and strain development
of their precursor, ansamitocin P3;
|
§ |
funded
development activities with contract manufacturers for the huN901
antibody, the huC242 antibody, and DM1, DM4 and their precursor,
ansamitocin P3;
|
§ |
operation
and maintenance of our conjugate manufacturing plant;
|
§ |
process
improvements to our TAP technology;
|
§ |
identification
and evaluation of potential antigen
targets;
|
§ |
evaluation
of internally developed and in-licensed antibody candidates;
and
|
§ |
development
and evaluation of additional cytotoxic
agents.
|
DM1
and
DM4 are the cytotoxic agents that we currently use in the
manufacture of our two TAP product candidates in clinical testing. We have
also investigated the viability of other maytansinoid effector molecules, which,
collectively with DM1 and DM4, we refer to as DMx. In order to make commercial
manufacture of DMx conjugates viable, we have devoted substantial resources
to
improving the strain of the microorganism that produces ansamitocin P3, the
precursor to DMx, to enhance manufacturing yields. We also continue to devote
considerable resources to improve other DMx manufacturing
processes.
On
January 8, 2004, we announced that pursuant to the terms and conditions of
a termination agreement between us and Vernalis, Vernalis relinquished its
rights to develop and commercialize huN901-DM1. As a result, we regained the
rights to develop and commercialize huN901-DM1. Under the terms of our January
7, 2004 Termination Agreement with Vernalis, we assumed responsibility of one
of
the studies underway with the compound, Study 001, on July 1, 2004. Since
then, we have expanded this study based upon the data from the initial patients
enrolled and have expanded the number of clinical centers participating in
this
study to expedite patient enrollment. Additionally, we initiated a Phase I
clinical trial with huN901-DM1 in CD56-positive multiple myeloma (Study 003)
in
September 2005. On December 15, 2005, we executed an amendment to the January
7,
2004 Termination Agreement with Vernalis. Under the terms of the amendment,
we
assumed responsibility as of December 15, 2005, at our own expense, to complete
the huN901-DM1 clinical study (Study 002) that had been initiated in the United
Kingdom. Vernalis paid us $365,000 in consideration of the expected cost of
the obligations assumed by us under the amendment. Such consideration is
included in other income/expense in the accompanying consolidated statements
of
operations for the year ended June 30, 2006. We intend to evaluate whether
to
out-license all or part of the development and commercial rights to this
compound as we move through the clinical trial process.
In
January 2004, we announced that we planned to advance cantuzumab
mertansine, or an improved version of the compound, into a clinical trial that
we would manage. In October 2004, we decided to move forward in developing
a modified version of cantuzumab mertansine which we call huC242-DM4. Patient
dosing was initiated for the Phase I study of huC242-DM4 in June 2005. We
intend to evaluate whether to out-license all or part of the development and
commercial rights to this compound as we move through the clinical trial process
for this compound.
In
fiscal
2003, we licensed the then three most advanced product candidates in our
preclinical portfolio to sanofi-aventis under the terms of our discovery,
development and commercialization collaboration. These three product candidates
were an anti-CD33 TAP compound for acute myeloid leukemia (AVE9633), an
anti-IGF-1R antibody (AVE1642), and an anti-CD19 TAP compound (SAR 3419) for
certain B-cell malignancies. Additional compounds were also licensed to
sanofi-aventis under this agreement.
In
December 2004, sanofi-aventis filed an Investigational New Drug Application
(IND) for AVE9633. Clinical testing of this compound was initiated in March
2005. The anti-IGF-1R antibody is a naked antibody directed against a target
found on various solid tumors, including certain breast, lung and prostate
cancers. At June 30, 2006, pursuant to our collaboration research program with
sanofi-aventis, we have identified a lead antibody product candidate and
sanofi-aventis is performing further advancement of this antibody. The third
potential product candidate is directed at certain anti-CD19 B-cell
malignancies, including non-Hodgkin's lymphoma, and is in preclinical
development. Additional compounds also are in various stages of
development.
During
the term of our research collaboration with sanofi-aventis, we are required
to
propose for inclusion in the collaborative research program certain antibodies
or antibody targets that we believe will have utility in oncology, with the
exception of those antibodies or antibody targets that are the subject of
our
preexisting
or future
collaboration and license agreements. Sanofi-aventis then has the right to
either include in or exclude from the collaborative research program these
proposed antibodies and antibody targets. If sanofi-aventis elects to exclude
any antibodies or antibody targets, we may elect to develop the products for
our
own pipeline. Furthermore, sanofi-aventis may only include a certain number
of
antibody targets in the research program at any one time. Sanofi-aventis must
therefore exclude any proposed antibody or antibody target in excess of the
agreed-upon number. Over the original, three-year term of the research program
and agreed-upon one-year extension, we will receive a minimum of
$68.9 million of committed research funding and will devote a significant
amount of our internal research and development resources to advancing the
research program. Under the terms of the agreement, we may advance any TAP
or
antibody products that sanofi-aventis has elected not to either initially
include or later advance in the research program.
The
potential product candidates that have been or that may eventually be excluded
from the sanofi-aventis collaboration are in an early stage of discovery
research and we are unable to accurately estimate which potential products,
if
any, will eventually move into our internal preclinical research program. We
are
unable to reliably estimate the costs to develop these products as a result
of
the uncertainties related to discovery research efforts as well as preclinical
and clinical testing. Our decision to move a product candidate into the clinical
development phase is predicated upon the results of preclinical tests. We cannot
accurately predict which, if any, of the discovery research stage product
candidates will advance from preclinical testing and move into our internal
clinical development program. The clinical trial and regulatory approval
processes for our product candidates that have advanced or we intend to advance
to clinical testing are lengthy, expensive and uncertain in both timing and
outcome. As a result, the pace and timing of the clinical development of our
product candidates is highly uncertain and may not ever result in approved
products. Completion dates and development costs will vary significantly for
each product candidate and are difficult to predict. A variety of factors,
many
of which are outside our control, could cause or contribute to the prevention
or
delay of the successful completion of our clinical trials, or delay or failure
to obtain necessary regulatory approvals. The costs to take a product
through clinical trials are dependent upon, among other things, the clinical
indications, the timing, size and dosing schedule of each clinical trial, the
number of patients enrolled in each trial, and the speed at which patients
are
enrolled and treated. Product candidates may be found ineffective or cause
harmful side effects during clinical trials, may take longer to progress through
clinical trials than anticipated, may fail to receive necessary regulatory
approvals or may prove impracticable to manufacture in commercial quantities
at
reasonable cost or with acceptable quality.
The
lengthy process of securing FDA approvals for new drugs requires the expenditure
of substantial resources. Any failure by us to obtain, or any delay in
obtaining, regulatory approvals would materially adversely affect our product
development efforts and our business overall. Accordingly, we cannot currently
estimate, with any degree of certainty, the amount of time or money that we
will
be required to expend in the future on our product candidates prior to their
regulatory approval, if such approval is ever granted. As a result of these
uncertainties surrounding the timing and outcome of our clinical trials, we
are
currently unable to estimate when, if ever, our product candidates that have
advanced into clinical testing will generate revenues and cash
flows.
Research
and development expense for the year ended June 30, 2006 increased $10.4 million
to $40.9 million from $30.5 million for the year ended June 30, 2005. Research
and development expense was $21.7 million for the year ended June 30, 2004.
The
number of our research and development personnel increased to 152 for the year
ended June 30, 2006 compared to 137 at June 30, 2005. We had 116 research and
development personnel for the year ended June 30, 2004. Research and development
salaries and related expenses increased by $3.5 million in the year ended June
30, 2006 compared to the year ended June 30, 2005 and increased by $3.8 million
in the year ended June 30, 2005 compared to the year ended June 30, 2004.
Included in salaries and related expenses for the year ended June 30, 2006
is
$2.4 million of stock compensation costs incurred with the adoption of SFAS
123(R) on July 1, 2005. Facilities expense, including depreciation, increased
$1.2 million during the year ended June 30, 2006 as compared to the same period
in 2005 and increased $1.0 million in the year ended June 30, 2005 compared
to
the year ended June 30, 2004. The increase in facilities expense in 2006 and
2005 was principally due to the addition of two manufacturing suites placed
in
service during 2005. Also contributing to the increase in 2006 was an increase
in administrative expenses primarily resulting from increased rent for the
facilities, real estate taxes and operating expenses, and higher utility costs.
We
expect
future research and development expenses to increase as we expand our clinical
trial activity. We do not track our research and development costs by project.
Since we use our research and development resources across multiple research
and
development projects, we manage our research and development expenses within
each of the categories listed in the following table and described in more
detail below (in thousands):
|
|
Year
Ended
June 30,
|
|
Research
and
Development
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
|
|
Research
|
|
$
|
13,943
|
|
$
|
12,273
|
|
$
|
10,015
|
|
Preclinical
and
Clinical Testing
|
|
|
7,343
|
|
|
5,000
|
|
|
3,198
|
|
Process
and Product
Development
|
|
|
5,463
|
|
|
4,501
|
|
|
3,739
|
|
Manufacturing
Operations
|
|
|
14,159
|
|
|
8,765
|
|
|
4,741
|
|
|
|
$
|
40,908
|
|
$
|
30,539
|
|
$
|
21,693
|
|
Research:
Research
includes expenses associated with activities to identify and evaluate new
targets and to develop and evaluate new antibodies and cytotoxic agents for
our
products and in support of our collaborators. Such expenses primarily include
personnel, fees to in-license certain technology, facilities and lab supplies.
Research expenses increased $1.7 million to $13.9 million in 2006 and increased
$2.3 million to $12.3 million in 2005. The increase in research expenses in
both
2006 and 2005 was primarily the result of an increase in salaries and related
expenses. The increase in salaries and related expenses was the result of an
increase in personnel required to support our collaborators’ research programs,
along with compensation costs incurred with the adoption of SFAS 123(R) as
of
July 1, 2005.
Preclinical
and Clinical Testing: Preclinical
and clinical
testing includes expenses related to preclinical testing of our own and, in
certain instances, our collaborators’ product candidates, and the cost of our
own clinical trials. Such expenses include personnel, patient enrollment at
our
clinical testing sites, consultant fees, contract services, and facility
expenses. Preclinical and clinical testing expenses increased $2.3 million
to
$7.3 million in 2006 and $1.8 million to $5.0 million in 2005. The increases
in
2006 and 2005 are substantially due to an increase in salaries and related
expense, the result of an increase in personnel to support both our own as
well
as our collaborators’ preclinical and clinical activities, along with
compensation costs incurred with the adoption of SFAS 123(R) as of July 1,
2005.
Clinical trial costs increased in 2006 and 2005 due to the advancement of our
own clinical programs. Also contributing to the increase in 2005 was an increase
in contract services for certain preclinical studies related to huC242-DM4.
Process
and Product Development:
Process
and product
development expenses include costs for development of clinical and commercial
manufacturing processes. Such expenses include the costs of personnel, contract
services and facility expenses. Total development expenses increased
approximately $962,000 to $5.5 million in 2006 and increased approximately
$762,000 to $4.5 million in 2005. The increases in 2006 and 2005 are primarily
the result of an increase in salaries and related expenses due to increases
in
personnel to support our own as well as our collaborators’ development
activities, along with compensation costs incurred with the adoption of SFAS
123(R) as of July 1, 2005.
Manufacturing
Operations: Manufacturing
operations expense includes costs to manufacture preclinical and clinical
materials for our own product candidates and costs to support the operation
and
maintenance of our conjugate manufacturing plant. Such expenses include
personnel, raw materials for our preclinical and clinical trials, manufacturing
supplies, and facilities expense. Manufacturing costs related to the production
of material for our collaborators are recorded as cost of clinical material
reimbursed in our statement of operations. Manufacturing operations expense
increased $5.4 million to $14.2 million in 2006 and increased $4.0 million
to
$8.8 million in 2005. The increase in 2006 as compared to 2005 was primarily
the
result of (i) an increase in salaries and related expenses due to an increase
in
personnel to support both our own as well as our collaborators’ preclinical and
clinical activities, along with compensation costs incurred with the adoption
of
SFAS 123(R) as of July 1, 2005, (ii) an increase in contract service expense
substantially due to higher antibody purchases as well as development costs
with
contract manufacturing organizations for the potential production of later-stage
materials, (iii) lower overhead utilization from the manufacture of clinical
materials on behalf of our collaborators, (iv) an increase in facilities expense
related to the addition of two manufacturing suites that were placed into
service during the prior fiscal year, and (v) an increase in administrative
expense resulting primarily from increases in freight in, electricity, and
recruiting fees. Partially offsetting these increases was the use of material
that was reserved in prior fiscal years. The increase in 2005 as compared to
2004 was primarily the result of (i) an increase in salaries and related
expenses, (ii) an increase in expenses to reserve for excess quantities of
ansamitocin P3 and DMx in accordance with our inventory reserve policy, (iii)
an
increase in facilities expense related to the addition of two manufacturing
suites that were placed into service during the year and (iv) lower overhead
utilization from the manufacture of clinical materials on behalf of our
collaborators.
Antibody
expense in anticipation of potential future clinical trials was $7.1 million
in
2006, $1.3 million in 2005 and $1.2 million in 2004. Approximately $818,000
of
the antibody expense during 2004 was related to the purchase of antibody in
support of one of the preclinical product candidates that was licensed by
sanofi-aventis. We received reimbursement of this amount in 2004 from
sanofi-aventis. The process of antibody production is lengthy as is the lead
time to establish a satisfactory production process at a vendor. Accordingly,
amounts incurred related to antibody production have fluctuated from period
to
period and we expect that these period fluctuations will continue in the
future.
During
fiscal 2005 and 2004, we recorded research and development expenses of $2.3
million and $307,000, respectively, related to ansamitocin P3 and DMx inventory
that we identified as excess based upon our inventory policy. We did not incur
any similar expenses in fiscal 2006. The higher write-off in 2005 as compared
to
2004 contributed to the increase in manufacturing operations expense in 2005,
as
noted above. Reserve requirements for excess quantities of P3 and DMx are
principally determined based on our collaborators’ forecasted demand compared to
our inventory position. Due to lead times required to secure material and the
changing requirements of our collaborators, expenses to provide for excess
quantities have fluctuated from period to period and we expect that these period
fluctuations will continue in the future. (See “Inventory” within our Critical
Accounting Policies for further discussion of our inventory reserve
policy).
General and Administrative Expenses
General
and administrative expenses for the year ended June 30, 2006 increased $1.3
million to $9.9 million from $8.6 million for the year ended June 30, 2005.
General and administrative expenses for the year ended June 30, 2004 were $7.0
million. The increases in both years primarily relate to increases in salaries
and related expenses, and expanded patent filings. Salaries and related expenses
increased due to an increase in personnel, along with compensation costs
incurred with the adoption of SFAS 123(R) as of July 1, 2005.
Interest
Income
Interest
income for the year ended June 30, 2006 increased $1.4 million to $3.3 million
from $1.8 million for the year ended June 30, 2005. Interest income for the
year
ended June 30, 2004 was $1.2 million. The increase in interest income from
fiscal 2006 to fiscal 2005 and fiscal 2005 to fiscal 2004 is primarily the
result higher rates of return resulting from higher yields on investments.
Net
Realized Losses on Investments
Net
realized losses on investments were $28,000, $81,000, and $58,000 for the years
ended June 30, 2006, 2005, and 2004, respectively. The net realized losses
in
2006, 2005, and 2004 are attributable to the timing of investment
sales.
Other
Income
Other
income for the year ended June 30, 2006 increased $313,000 to $320,000 as
compared to $8,000 for the year ended June 30, 2005. During the year ended
June
30, 2006, we recorded as other income $365,000 for consideration of the expected
cost of the obligations assumed by us resulting from the Amendment to the
January 7, 2004 Termination Agreement executed by us and Vernalis. Under the
terms of the Amendment, we assumed responsibility as of December 15, 2005,
at
our own expense, to complete Study 002 for huN901-DM1. Offsetting this amount,
we incurred foreign currency translation expense related to obligations with
non-United States-dollar-based suppliers. Other income for the year ended June
30, 2004 was $1.4 million. During the year ended June 30, 2004, we recorded
in
other income reimbursement of approximately $1.3 million from sanofi-aventis
for
the GMP production of antibody manufactured in support of one of the preclinical
product candidates that was licensed by sanofi-aventis.
Liquidity
and
Capital Resources
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
|
|
(In
thousands)
|
|
Cash
and short-term
investments
|
|
$
|
75,023
|
|
$
|
90,565
|
|
Working
capital
|
|
|
73,820
|
|
|
90,710
|
|
Stockholders’
equity
|
|
|
72,350
|
|
|
86,842
|
|
Cash
Flows
We
require cash to fund our operating expenses, including the advancement of our
own clinical programs, and to make capital expenditures. Historically, we have
funded our cash requirements primarily through equity financings in public
markets and payments from our collaborators, including equity investments,
license fees and research funding. As of June 30, 2006, we had approximately
$75.0 million in cash and marketable securities. Net cash used in
operations was $14.3 million, $2.1 million and $5.0 million during the
years ended June 30, 2006, 2005 and 2004, respectively. The principal use of
cash in operating activities for all periods presented was to fund our net
loss.
The increase in operational cash use from fiscal 2005 to fiscal 2006 is
principally due to the increased net loss, as a result of increased research
and
development costs and general and administrative expenses compared to last
year,
without the benefit of the reduction in working capital that occurred in fiscal
2005. The decrease in operational cash use from fiscal 2004 to fiscal 2005
is
substantially due to a reduction in working capital that partially offset our
fiscal 2005 net loss. Also contributing to the decrease in fiscal 2005 was
$5.0
million of upfront fees received for which revenue recognition was deferred.
Net
cash
provided by investing activities was $14.5 million for the year ended June
30,
2006, and represents cash inflows from the sales and maturities of marketable
securities partially offset by capital expenditures. Net cash used for investing
activities was $1.8 million for the year ended June 30, 2005 and represents
cash
outflows for capital expenditures partially offset by proceeds from the sales
and maturities of marketable securities. Net cash provided by investing
activities was $1.1 million for the year ended June 30, 2004 and primarily
represents cash inflows from the sale and maturities of marketable securities
partially offset by capital expenditures. Capital expenditures were $2.1
million, $2.4 million and $2.0 million for the fiscal years ended June 30,
2006, 2005 and 2004, respectively. Capital expenditures for the year ended
June
30, 2006, consisted primarily of laboratory equipment. For the year ended June
30, 2005, capital expenditures consisted primarily of capacity and capability
expansion at our existing conjugate manufacturing facility located in Norwood,
Massachusetts. For the year ended June 30, 2004, capital expenditures consisted
primarily of the renovation of our new laboratory and office facility at 148
Sidney Street, Cambridge, Massachusetts. Net cash provided
by
financing activities was $1.2 million, $529,000 and $599,000 for the years
ended
June 30, 2006, 2005 and 2004, respectively, which represents the proceeds from
the exercise of 454,000, 231,000 and 194,000 stock options, respectively.
We anticipate
that our current capital resources and future collaborator
payments, including committed research funding that we expect to receive from
sanofi-aventis pursuant to the terms of our collaboration agreement, will enable
us to meet our operational expenses and capital expenditures for at least the
next two to three fiscal years. We believe that our existing capital resources
in addition to our established collaborative agreements will provide funding
sufficient to allow us to meet our obligations under all collaborative
agreements while also allowing us to develop product candidates and technologies
not covered by collaborative agreements. However, we cannot provide assurance
that such collaborative agreement funding will, in fact, be received. Should
we
not meet some or all of the terms and conditions of our various collaboration
agreements, we may be required to pursue additional strategic partners, secure
alternative financing arrangements, and/or defer or limit some or all of our
research, development and/or clinical projects.
Contractual
Obligations
Below
is
a table that presents our contractual obligations and commercial commitments
as
of June 30, 2006 (in thousands):
|
|
Payments
Due
by Period
|
|
|
|
Total
|
|
Less
than
One Year
|
|
1-3
Years
|
|
4-5
Years
|
|
More
than
5
Years
|
|
|
|
|
|
Operating
lease
obligations
|
|
$
|
8,081
|
|
$
|
3,482
|
|
$
|
4,362
|
|
$
|
237
|
|
$
|
-
|
|
Unconditional
purchase obligations
|
|
|
6,949
|
|
|
6,949
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
15,030
|
|
$
|
10,431
|
|
$
|
4,362
|
|
$
|
237
|
|
$
|
-
|
|
Recent
Accounting
Pronouncements
In
June
2005, the FASB issued SFAS No. 154, Accounting
Changes and
Error Corrections,
which will require
entities that voluntarily make a change in accounting principle to apply that
change retrospectively to prior periods’ financial statements, unless this would
be impracticable. SFAS No. 154 supersedes APB Opinion No. 20, Accounting
Changes,
which previously required that most voluntary changes in accounting principle
be
recognized by including in the current period’s net income the cumulative effect
of changing to the new accounting principle. SFAS No. 154 also makes the
distinction between “retrospective application” of an accounting principle and
the “restatement” of financial statements to reflect the correction of an error.
Another significant change in practice under SFAS No. 154 will be that if an
entity changes its method of depreciation, amortization, or depletion for
long-lived, non-financial assets, the change must be accounted for as a change
in accounting estimate. Under APB No. 20, such a change would have been reported
as a change in accounting principle. SFAS No. 154 applies to accounting changes
and error corrections that are made in fiscal years beginning after December
15,
2005. Although we continue to evaluate the application of SFAS No. 154, we
do not currently believe that adoption will have a material impact on our
results of operations, financial position or cash flows.
In
July
2006, the FASB issued Financial Interpretation No. (FIN) 48, Accounting
for
Uncertainty in Income Taxes, which
applies to all tax
positions related to income taxes subject to No. 109 (SFAS 109),
Accounting
for Income
Taxes.
This includes tax positions considered to be “routine” as well as those with a
high degree of uncertainty. FIN 48 utilizes a two-step approach for evaluating
tax positions. Recognition (step one) occurs when an enterprise concludes that
a
tax position, based solely on its technical merits, is more-likely-than-not
to
be sustained upon examination. Measurement (step two) is only addressed if
step
one has been satisfied (i.e., the position is more-likely-than-not to be
sustained). Under step two, the tax benefit is measured as the largest amount
of
benefit, determined on a cumulative probability basis that is
more-likely-than-not to be realized upon ultimate settlement. FIN 48’s use of
the term “more-likely-than-not” in steps one and two is consistent with how that
term is used in SFAS 109 (i.e., a likelihood of occurrence greater than 50
percent).
Those
tax
positions failing to qualify for initial recognition are recognized in the
first
subsequent interim period they meet the more-likely-than-not standard, or are
resolved through negotiation or litigation with the taxing authority, or upon
expiration of the statute of limitations. Derecognition of a tax position that
was previously recognized would occur when a company subsequently determines
that a tax position no longer meets the more-likely-than-not threshold of being
sustained. FIN 48 specifically prohibits the use of a valuation allowance as
a
substitute for derecognition of tax positions. Additionally, FIN 48 requires
expanded disclosure requirements, which include a tabular rollforward of the
beginning and ending aggregate unrecognized tax benefits as well as specific
detail related to tax uncertainties for which it is reasonably possible the
amount of unrecognized tax benefit will significantly increase or decrease
within twelve months.
These disclosures are
required at each annual reporting period unless a significant change occurs
in
an interim period. FIN 48 is effective for fiscal years beginning after
December 15, 2006 (our fiscal year 2008). We do not believe the adoption
will have material impact on our results of operation.
Item
7A. Quantitative
and Qualitative Disclosure About Market Risk
We
maintain an investment portfolio in accordance with our Investment Policy.
The
primary objectives of our Investment Policy are to preserve principal, maintain
proper liquidity to meet operating needs and maximize yields. Although our
investments are subject to credit risk, our Investment Policy specifies credit
quality standards for our investments and limits the amount of credit exposure
from any single issue, issuer or type of investment. Our investments are also
subject to interest rate risk and will decrease in value if market interest
rates increase. However, due to the conservative nature of our investments
and
relatively short duration, interest rate risk is mitigated. We do not own
derivative financial instruments in our investment portfolio. Accordingly,
we do
not believe that there is any material market risk exposure with respect to
derivative or other financial instruments that would require disclosure under
this item.
Item
8. Financial
Statements and Supplementary Data
INDEX
TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
|
|
38 |
Consolidated
Financial Statements:
|
|
|
|
|
|
39 |
|
|
|
40 |
|
|
|
41 |
|
|
|
42 |
|
|
|
43 |
The
Board
of Directors and Stockholders of ImmunoGen, Inc.
We
have
audited the accompanying consolidated balance sheets of ImmunoGen, Inc. as
of
June 30, 2006 and 2005, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended June 30, 2006. Our audits also included the financial statement schedule
listed in the Index at Item 15. These financial statements and schedule are
the
responsibility of the Company's management. Our responsibility is to express
an
opinion on these financial statements and schedule based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of ImmunoGen, Inc. at
June 30, 2006 and 2005, and the consolidated results of its operations and
its
cash flows for each of the three years in the period ended June 30, 2006, in
conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of ImmunoGen, Inc.'s internal
control over financial reporting as of June 30, 2006, based on criteria
established in Internal Control-Integrated Framework issued by the Committee
of
Sponsoring Organizations of the Treadway Commission and our report dated August
24, 2006 expressed an unqualified opinion thereon.
/s/
Ernst &
Young
Boston,
Massachusetts
August
24, 2006
IMMUNOGEN,
INC.
CONSOLIDATED
BALANCE SHEETS
AS
OF JUNE 30, 2006 AND JUNE 30, 2005
In
thousands, except per share amounts
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
4,813
|
|
$
|
3,423
|
|
Marketable
securities
|
|
|
70,210
|
|
|
87,142
|
|
Accounts
receivable
|
|
|
1,569
|
|
|
1,418
|
|
Unbilled
revenue
|
|
|
5,419
|
|
|
5,035
|
|
Inventory
|
|
|
1,235
|
|
|
1,520
|
|
Prepaid
and other current assets
|
|
|
1,298
|
|
|
1,398
|
|
Total
current assets
|
|
|
84,544
|
|
|
99,936
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net of accumulated depreciation
|
|
|
9,319
|
|
|
9,883
|
|
Other
assets
|
|
|
265
|
|
|
313
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
94,128
|
|
$
|
110,132
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,346
|
|
$
|
2,099
|
|
Accrued
compensation
|
|
|
925
|
|
|
728
|
|
Other
current accrued liabilities
|
|
|
3,129
|
|
|
1,327
|
|
Current
portion of deferred revenue
|
|
|
5,323
|
|
|
5,072
|
|
Total
current liabilities
|
|
|
10,723
|
|
|
9,226
|
|
|
|
|
|
|
|
|
|
Deferred
revenue, net of current portion
|
|
|
10,705
|
|
|
13,739
|
|
Other
long-term liabilities
|
|
|
350
|
|
|
325
|
|
Total
liabilities
|
|
|
21,778
|
|
|
23,290
|
|
Commitments
and Contingencies (Note H)
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Common
stock, $.01 par value; authorized 75,000 shares; issued and outstanding
45,149 shares and 44,695 shares as of June 30, 2006 and June 30,
2005, respectively
|
|
|
451
|
|
|
447
|
|
Additional
paid-in capital
|
|
|
321,885
|
|
|
318,300
|
|
Deferred
compensation
|
|
|
-
|
|
|
(13
|
)
|
Treasury
stock, 3,675 shares at June 30, 2006 and 2005
|
|
|
(11,071
|
)
|
|
(11,071
|
)
|
Accumulated
deficit
|
|
|
(238,561
|
)
|
|
(220,727
|
)
|
Accumulated
other comprehensive loss
|
|
|
(354
|
)
|
|
(94
|
)
|
Total
stockholders’ equity
|
|
|
72,350
|
|
|
86,842
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
94,128
|
|
$
|
110,132
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
IMMUNOGEN,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
In
thousands,
except per share data
|
|
Year
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Research
and
development support
|
|
$
|
21,849
|
|
$
|
18,419
|
|
$
|
13,837
|
|
License
and
milestone fees
|
|
|
7,151
|
|
|
6,776
|
|
|
5,548
|
|
Clinical
materials
reimbursement
|
|
|
3,088
|
|
|
10,523
|
|
|
6,571
|
|
Total
revenues
|
|
|
32,088
|
|
|
35,718
|
|
|
25,956
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost
of clinical
materials reimbursed
|
|
|
2,668
|
|
|
9,236
|
|
|
5,659
|
|
Research
and
development (1)
|
|
|
40,908
|
|
|
30,539
|
|
|
21,693
|
|
General
and
administrative (1)
|
|
|
9,898
|
|
|
8,620
|
|
|
7,017
|
|
Total
expenses
|
|
|
53,474
|
|
|
48,395
|
|
|
34,369
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from
operations
|
|
|
(21,386
|
)
|
|
(12,677
|
)
|
|
(8,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income,
net
|
|
|
3,274
|
|
|
1,828
|
|
|
1,219
|
|
Net
realized loss on investments
|
|
|
(28
|
)
|
|
(81
|
)
|
|
(58
|
)
|
Gain
on sale of
assets
|
|
|
3
|
|
|
-
|
|
|
-
|
|
Other
income
|
|
|
320
|
|
|
8
|
|
|
1,381
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income
tax expense
|
|
|
(17,817
|
)
|
|
(10,922
|
)
|
|
(5,871
|
)
|
Income
tax
expense
|
|
|
17
|
|
|
29
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(17,834
|
)
|
$
|
(10,951
|
)
|
$
|
(5,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
net loss per common share
|
|
$
|
(0.43
|
)
|
$
|
(0.27
|
)
|
$
|
(0.15
|
)
|
Basic
and diluted
weighted average common shares outstanding
|
|
|
41,184
|
|
|
40,868
|
|
|
40,646
|
|
(1)
|
Includes
the
following stock compensation expense for the years ended June
30:
|
|
|
2006
|
|
2005
|
|
2004
|
|
Research
and
development
|
|
$
|
1,439
|
|
$
|
-
|
|
$
|
-
|
|
General
and
administrative
|
|
|
985
|
|
|
176
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,424
|
|
$
|
176
|
|
$
|
107
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
IMMUNOGEN, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS'
EQUITY
In
thousands
|
|
Common
Stock
|
|
Additional
Paid-In
|
|
Deferred
|
|
Treasury
Stock
|
|
Accumulated
|
|
Accumulated
Other Comprehensive Income
|
|
Comprehensive
Income
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Compensation
|
|
Shares
|
|
Amount
|
|
Deficit
|
|
(Loss)
|
|
(Loss)
|
|
Equity
|
|
Balance
at June 30, 2003
|
|
|
44,261
|
|
$
|
443
|
|
$
|
317,077
|
|
$
|
(41
|
)
|
|
3,675
|
|
$
|
(11,071
|
)
|
$
|
(203,859
|
)
|
$
|
131
|
|
|
|
|
$
|
102,680
|
|
Unrealized
(losses) gains on marketable securities, net
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(233
|
)
|
|
(233
|
)
|
|
(233
|
)
|
Net
loss for the year ended June 30, 2004
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,917
|
)
|
|
-
|
|
|
(5,917
|
)
|
|
(5,917
|
)
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,150
|
)
|
|
-
|
|
Stock
options exercised
|
|
|
195
|
|
|
2
|
|
|
597
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
599
|
|
Issuance
of stock and stock units for directors’ compensation
|
|
|
6
|
|
|
-
|
|
|
31
|
|
|
(40
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(9
|
)
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
17
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
17
|
|
Recapture
and reversal of compensation expense for stock options related to
terminated employees
|
|
|
-
|
|
|
-
|
|
|
(1
|
)
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Balance
at June 30, 2004
|
|
|
44,462
|
|
$
|
445
|
|
$
|
317,704
|
|
$
|
(63
|
)
|
|
3,675
|
|
$
|
(11,071
|
)
|
$
|
(209,776
|
)
|
$
|
(102
|
)
|
|
|
|
$
|
97,137
|
|
Unrealized
(losses) gains on marketable securities, net
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8
|
|
|
8
|
|
|
8
|
|
Net
loss for the year ended June 30, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(10,951
|
)
|
|
-
|
|
|
(10,951
|
)
|
|
(10,951
|
)
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(10,943
|
)
|
|
-
|
|
Stock
options exercised
|
|
|
231
|
|
|
2
|
|
|
526
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
528
|
|
Issuance
of stock for directors’ compensation
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35
|
|
Compensation
for stock options
|
|
|
-
|
|
|
-
|
|
|
74
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
74
|
|
Recapture
and reversal of compensation expense for stock options related to
terminated employees
|
|
|
-
|
|
|
-
|
|
|
(4
|
)
|
|
15
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11
|
|
Balance
at June 30, 2005
|
|
|
44,695
|
|
$
|
447
|
|
$
|
318,300
|
|
$
|
(13
|
)
|
|
3,675
|
|
$
|
(11,071
|
)
|
$
|
(220,727
|
)
|
$
|
(94
|
)
|
|
|
|
$
|
86,842
|
|
Unrealized
(losses) gains on marketable securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(260
|
)
|
|
(260
|
)
|
|
(260
|
)
|
Net
loss for the year ended June 30, 2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(17,834
|
)
|
|
-
|
|
|
(17,834
|
)
|
|
(17,834
|
)
|
Comprehensive
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$ |
(18,094
|
)
|
|
-
|
|
Stock
options exercised
|
|
|
454
|
|
|
4
|
|
|
1,146
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,150
|
|
Compensation
for stock options
|
|
|
-
|
|
|
-
|
|
|
2,452
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,452
|
|
Reversal
of deferred compensation
|
|
|
-
|
|
|
-
|
|
|
(13
|
)
|
|
13
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Balance
at June 30, 2006
|
|
|
45,149
|
|
$
|
451
|
|
$
|
321,885
|
|
$
|
-
|
|
|
3,675
|
|
$
|
(11,071
|
)
|
$
|
(238,561
|
)
|
$
|
(354
|
)
|
|
|
|
$
|
72,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
IMMUNOGEN,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
In
thousands
|
|
Year
Ended June 30,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
$
|
(17,834
|
)
|
$
|
(10,951
|
)
|
$
|
(5,917
|
)
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used for operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,688
|
|
|
2,222
|
|
|
1,292
|
|
(Gain)
loss on disposal of fixed assets
|
|
|
(1
|
)
|
|
39
|
|
|
-
|
|
Loss
on sale of marketable securities
|
|
|
28
|
|
|
81
|
|
|
58
|
|
Inventory
write-down
|
|
|
153
|
|
|
2,302
|
|
|
307
|
|
Stock
and deferred share unit compensation
|
|
|
2,424
|
|
|
176
|
|
|
107
|
|
Deferred
rent
|
|
|
53
|
|
|
5
|
|
|
5
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(151
|
)
|
|
3,446
|
|
|
(4,191
|
)
|
Unbilled
revenue
|
|
|
(384
|
)
|
|
615
|
|
|
(5,545
|
)
|
Inventory
|
|
|
132
|
|
|
2,816
|
|
|
(1,324
|
)
|
Prepaid
and other current assets
|
|
|
100
|
|
|
(571
|
)
|
|
155
|
|
Other
assets
|
|
|
48
|
|
|
19
|
|
|
-
|
|
Accounts
payable
|
|
|
(753
|
)
|
|
(47
|
)
|
|
1,007
|
|
Accrued
compensation
|
|
|
197
|
|
|
156
|
|
|
180
|
|
Other
current accrued liabilities
|
|
|
1,802
|
|
|
(37
|
)
|
|
(46
|
)
|
Deferred
revenue
|
|
|
(2,783
|
)
|
|
(2,336
|
)
|
|
8,896
|
|
Net
cash used for operating activities
|
|
|
(14,281
|
)
|
|
(2,065
|
)
|
|
(5,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from maturities or sales of marketable securities
|
|
|
553,396
|
|
|
1,067,761
|
|
|
433,393
|
|
Purchases
of marketable securities
|
|
|
(536,752
|
)
|
|
(1,067,135
|
)
|
|
(430,384
|
)
|
Capital
expenditures
|
|
|
(2,126
|
)
|
|
(2,435
|
)
|
|
(1,956
|
)
|
Proceeds
from sale of fixed assets
|
|
|
3
|
|
|
-
|
|
|
-
|
|
Net
cash provided by (used for) investing activity
|
|
|
14,521
|
|
|
(1,809
|
)
|
|
1,053
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from stock options exercised
|
|
|
1,150
|
|
|
529
|
|
|
599
|
|
Net
cash provided by financing activities
|
|
|
1,150
|
|
|
529
|
|
|
599
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
1,390
|
|
|
(3,345
|
)
|
|
(3,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning balance
|
|
|
3,423
|
|
|
6,768
|
|
|
10,132
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, ending balance
|
|
$
|
4,813
|
|
$
|
3,423
|
|
$
|
6,768
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure:
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
17
|
|
$
|
35
|
|
$
|
45
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
A. Nature
of Business and Plan of Operations
ImmunoGen, Inc.
(the Company) was incorporated in Massachusetts in 1981 and is focused on the
development of antibody-based anticancer therapeutics. The Company continues
to
research and develop its various product candidates and technologies and does
not expect to derive revenue from commercial product sales within the near
future. It is anticipated that the Company’s existing capital resources,
enhanced by collaborative agreement funding, will enable current and planned
operations to be maintained for at least the next two to three fiscal years.
However, if the Company is unable to achieve future milestones under its
collaborative agreements (see Note C) or raise additional capital, the
Company may be required to defer or limit some or all of its research,
development and/or clinical projects.
The
Company is subject to risks common to companies in the biotechnology industry
including, but not limited to, the development by its competitors of new
technological innovations, dependence on key personnel, protection of
proprietary technology, manufacturing and marketing limitations, collaboration
arrangements, third-party reimbursements and compliance with governmental
regulations.
B. Summary
of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, ImmunoGen Securities Corp. (established in
December 1989), and ImmunoGen Europe Limited (established in October 2005).
All intercompany transactions and balances have been eliminated.
Reclassifications
Prior
period amounts have been adjusted to conform to the current year presentation.
Investment management fees previously included in general and administrative
expense have been reclassified against interest income, net.
Revenue
Recognition—Change in Accounting Principle
Effective
July 1, 2000, ImmunoGen changed its method of accounting for revenue
recognition in accordance with Staff Accounting Bulletin No. 101, “Revenue
Recognition in Financial Statements” (SAB 101). Under the new accounting
method, the Company recognizes revenue from non-refundable, upfront license
payments not specifically tied to a separate earnings process ratably over
the
term of the Company’s substantial involvement during development. The cumulative
effect of the change in accounting on prior years resulted in a non-cash charge
to income of $5.7 million, which was included in the net loss for the year
ended June 30, 2001. Included in revenue for the years ended June 30,
2006, 2005 and 2004 is $593,000, $643,000 and $643,000, respectively, of revenue
that was recognized in years prior to the Company’s adoption of SAB 101 and
included in the cumulative effect of the change in accounting principle.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
Revenue
Recognition
The
Company enters into out-licensing and development agreements with collaborative
partners for the development of monoclonal antibody-based cancer therapeutics.
The Company follows the provisions of the Securities and Exchange Commission’s
Staff Accounting Bulletin No. 104 (SAB No. 104),
Revenue Recognition,
and EITF
00-21,
Accounting for Revenue Arrangements with Multiple Elements
(EITF00-21). In accordance with SAB No. 104 and EITF 00-21, the Company
recognizes revenue related to research activities as they are performed, as
long
as there is persuasive evidence of an arrangement, the fee is fixed or
determinable, and collection of the related receivable is probable. The terms
of
the Company’s agreements contain multiple elements which typically include
non-refundable license fees, payments based upon the achievement of certain
milestones and royalties on product sales. The Company evaluates such
arrangements to determine if the deliverables are separable into units of
accounting and then applies applicable revenue recognition criteria to each
unit
of accounting.
At
June
30, 2006, the Company had the following three types of collaborative contracts
with the parties identified below:
|
•
|
License
to a single target antigen (single target
license):
|
Biogen Idec, Inc.
Boehringer
Ingelheim International GmbH
Centocor, Inc.,
a wholly owned subsidiary of Johnson & Johnson
Genentech, Inc.
(multiple licenses)
Millennium
Pharmaceuticals, Inc.
|
•
|
Broad
option agreements to acquire rights to a limited number of targets
over a
specified time period (broad
license):
|
Amgen,
Inc. (formerly Abgenix, Inc.)
Genentech, Inc.
Millennium
Pharmaceuticals, Inc.
• Broad
agreement to discover, develop and commercialize antibody-based anticancer
products:
Sanofi-aventis
Group (sanofi-aventis)
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
Generally,
all of these collaboration agreements provide that the Company will
(i) manufacture preclinical and certain clinical materials for its
collaborators, at the collaborator's request and cost, or in some cases, cost
plus a profit margin, (ii) receive payments upon the collaborators'
achievements of certain milestones and (iii) receive royalty payments,
generally until the later of the last applicable patent expiration or 12 years
after product launch. The Company is required to provide technical training
and
any process improvements and know-how to its collaborators during the term
of
the collaboration agreements. Practically, once a collaborator receives U.
S.
Food and Drug Administration (FDA) approval for any drug and the manufacturing
process used to produce the drug, the collaborator will not be able to
incorporate any process improvements or know-how into its manufacturing process
without additional testing and review by the FDA. Accordingly, the Company
believes that it is very unlikely that its collaborators will require the
Company's services subsequent to FDA approval.
Generally,
upfront payments on single target licenses are deferred over the period of
the
Company's substantial involvement during development. ImmunoGen employees are
available to assist the Company's collaborators during the development of their
products. The Company estimates this development phase to begin at the inception
of the collaboration agreement and conclude when and if the product receives
FDA
approval. The Company believes this period of involvement ranges, on average,
and depending on the nature of the license, between six and seven and one-half
years. At each reporting period, the Company analyzes individual product facts
and circumstances and reviews the estimated period of its substantial
involvement to determine whether a significant change in its estimates has
occurred and adjusts the deferral period accordingly. In the event that a single
target license were to be terminated, the Company would recognize as revenue
any
portion of the upfront fee that had not previously been recorded as revenue,
but
was classified as deferred revenue at the date of such termination.
The
Company defers upfront payments received from its broad licenses over the period
during which the collaborator may elect to receive a license. These periods
are
specific to each collaboration agreement, but are between seven and
12 years. If a collaborator selects an option to acquire a license under
these agreements, any option fee is deferred and recorded over the life of
the
option, generally 12 to 18 months. If a collaborator exercises an option
and the Company grants a single target license to the collaborator, the Company
defers the license fee and accounts for the fee as it would an upfront payment
on a single target license, as discussed above. In the event that a broad
license agreement were to be terminated, the Company would recognize as revenue
any portion of the upfront fee that had not previously been recorded as revenue,
but was classified as deferred revenue at the date of such termination. In
the
event that a collaborator elects to discontinue development of a specific
product candidate under a single target license, but retains its right to use
the Company's technology to develop an alternative product candidate to the
same
target or a target substitute, the Company would cease amortization of any
remaining portion of the upfront fee until there is substantial pre-clinical
activity on another product candidate and the Company’s remaining period of
substantial involvement can be estimated.
Quarterly,
the Company reassesses its periods of substantial involvement over which the
Company amortizes its upfront license fees. In the fiscal year ended June 30,
2006, this reduced the recognition of license and milestone fees by
approximately $84,000.
The
Company's discovery, development and commercialization agreement with
sanofi-aventis included an upfront payment of $12.0 million that
sanofi-aventis paid to ImmunoGen in August 2003. The Company deferred the
upfront payment and recognizes it ratably over the period of the Company's
substantial involvement of five years, which includes the term of the
collaborative research program
of
three years and two 12-month extensions that sanofi-aventis may exercise. The
discovery, development and commercialization agreement also provides that
ImmunoGen receive committed research funding of $50.7 million over the initial
three-year period, as determined in each of the three research program years.
The committed research funding is based upon resources that ImmunoGen is
required to contribute to the collaboration. The Company records the research
funding as it is earned based upon its actual resources utilized in the
collaboration. In August 2005, sanofi-aventis exercised the first of the two
12-month extensions. This extension will provide the Company with $18.2 million
in additional committed funding over the twelve months beginning September
1,
2006.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
At
the
conclusion of the second sanofi-aventis research program year on August 31,
2005, a review of research activities during this period was conducted. This
review identified $1.1 million in billable research activities performed under
the program during the fiscal year ended June 30, 2005, which had not been
billed or recorded as revenue. Accordingly, the Company has included this
additional $1.1 million of research and support revenue in the accompanying
consolidated statement of operations for the year ended June 30, 2006. The
Company does not believe such previously unrecorded revenue was material to
the
results of operations or the financial position of the Company for any interim
period of 2005 or 2006 or for the years ended June 30, 2005 and
2006.
When
milestone fees are specifically tied to a separate earnings process, revenue
is
recognized when the milestone is achieved. In addition, when appropriate, the
Company recognizes revenue from certain research payments based upon the level
of research services performed during the period of the research contract.
Deferred revenue represents amounts received under collaborative agreements
and
not yet earned pursuant to these policies. Where the Company has no continuing
involvement, the Company will record non-refundable license fees as revenue
upon
receipt and will record milestone revenue upon achievement of the milestone
by
the collaborative partner.
The
Company may produce preclinical and clinical materials for its collaborators.
The Company is reimbursed for its fully burdened cost to produce clinical
materials and, in some cases, fully burdened cost plus a profit margin. The
Company recognizes revenue on preclinical and clinical materials when the
materials have passed all quality testing required for collaborator acceptance
and title has transferred to the collaborator.
The
Company also produces research material for potential collaborators under
material transfer agreements. Additionally, research activities are
performed, including developing antibody-specific conjugation processes, on
behalf of the Company's collaborators and potential collaborators during the
early evaluation and preclinical testing stages of drug development. Generally,
the Company is reimbursed for its fully burdened cost of producing these
materials or providing these services. The Company records the amounts received
for the materials produced or services performed as a component of research
and
development support.
Inventory
Inventory
costs primarily relate to clinical trial materials being manufactured for sale
to the Company’s collaborators. Inventory is stated at the lower of cost or
market as determined on a first-in, first-out (FIFO) basis.
Inventory
at June 30, 2006 and 2005 is summarized below (in thousands):
|
|
June
30,
|
|
|
2006
|
|
2005
|
|
|
|
Raw
materials
|
|
$
|
-
|
|
$
|
797
|
Work
in process
|
|
|
1,235
|
|
|
723
|
Total
|
|
$
|
1,235
|
|
$
|
1,520
|
Inventory
cost is stated net of write-downs of $2.9 million and $3.7 million as of June
30, 2006 and June 30, 2005, respectively. The write-downs represent the cost
of
DM1, DM4 and ansamitocin P3 that the Company considers to be in excess of a
12-month supply based on current collaborator firm fixed orders and projections.
DM1
and
DM4 are cell-killing agents used in all Tumor-Activated Prodrug (TAP) product
candidates currently in preclinical and clinical testing, and are the subject
of
the Company's collaborations. DM1 and DM4 (collectively referred to as DMx)
are
both
manufactured
from a precursor, ansamitocin P3.
Due
to
yield fluctuations, the actual amount of ansamitocin P3 and DMx that will be
produced in future periods under supply agreements is highly uncertain. As
such,
the amount of ansamitocin P3 and/or DMx produced could be more than is
required
to
support
the development of the Company's and its collaborators' products. Such excess
product, as determined under the Company's inventory reserve policy, has been
charged to research and development expense to date.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
The Company produces preclinical and clinical materials for its collaborators
either in anticipation of or in support of clinical trials, or for process
development and analytical purposes. Under the terms of supply agreements with
its collaborators, the Company generally receives rolling six month firm-fixed
orders for conjugate that the Company is required to manufacture, and rolling
12-month manufacturing projections for the quantity of conjugate the
collaborator expects to need in any given 12-month period. The amount of
clinical material produced is directly related to the number of on-going
clinical trials for which the Company is producing clinical material for itself
and its collaborators, the speed of enrollment in those trials and the dosage
schedule of each clinical trial. Because these elements can vary significantly
over the course of a trial, significant differences between collaborators'
actual manufacturing orders and their projections could result in 12-month
usage
of DMx and ansamitocin P3 varying significantly from estimated usage at an
earlier reporting period. To the extent that a collaborator has provided the
Company with a firm fixed order, the collaborator is contractually required
to
reimburse the Company the full cost of the conjugate and any agreed margin
thereon, even if the collaborator subsequently cancels the manufacturing
run.
The
Company accounts for the DMx and ansamitocin P3 inventory as
follows:
|
a)
|
That
portion of the DMx and/or ansamitocin P3 that the Company intends
to use
in the production of its own products is expensed upon receipt of
the
materials;
|
|
b)
|
To
the extent that the Company has collaborator projections for up to
12 months of firm fixed orders, the Company capitalizes the value of
DMx and ansamitocin P3 that will be used in the production of conjugate
subject to these firm fixed orders and/or
projections;
|
|
c)
|
The
Company considers more than a 12-month supply of ansamitocin P3 and/or
DMx
that is not supported by collaborators' firm fixed orders or projections
to be excess. The Company establishes a reserve to reduce to zero
the
value of any such excess ansamitocin P3 or DMx inventory with a
corresponding charge to research and development expense;
and
|
|
d)
|
The
Company also considers any other external factors and information
of which
it becomes aware and assesses the impact of such factors or information
on
the net realizable value of the DMx and ansamitocin P3 inventory
at each
reporting period.
|
In
the
year ended June 30, 2005, the Company recorded as research and development
expense $2.3 million of ansamitocin P3 and DMx that the Company identified
as
excess based upon the Company's inventory policy as described above. No
additional amounts were recorded during the fiscal year ended June 30, 2006
related to excess inventory, as the total amount of the Company's on-hand supply
of DMx and ansamitocin P3 was fully reserved. However, in the year ended June
30, 2006, the Company recorded $153,000 to write down certain batches of
ansamitocin P3 and DMx and certain work in process amounts to their net
realizable value. If the Company increases its on-hand supply of DMx or
ansamitocin P3, a corresponding change to the Company's collaborators'
projections could result in significant changes in the Company's estimate of
the
net realizable value of such DMx and ansamitocin P3 inventory. Reductions in
collaborators' projections could indicate that the Company has additional excess
DMx and/or ansamitocin P3 inventory and the Company would then evaluate the
need
to record further write-downs, included as charges to cost of clinical materials
reimbursement.
Unbilled
Revenue
The
majority of the Company's unbilled revenue at June 30, 2006 and 2005 represents
(i) committed research funding earned based on actual resources utilized
under the Company's discovery, development and commercialization agreement
with
sanofi-aventis; (ii) reimbursable expenses incurred under the Company's
discovery, development and commercialization agreement with sanofi-aventis
that
the Company has not yet invoiced; and (iii) research funding earned based
on actual resources utilized under the Company's development and license
agreements with Biogen Idec, Centocor and Genentech; and (iv) clinical materials
that have passed quality testing, that the Company has shipped and title has
transferred to the collaborator, but the Company has not yet
invoiced.
Other
Current Accrued Liabilities
Other
current accrued liabilities consisted of the following at June 30, 2006 and
2005
(in thousands):
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
Accrued
contract payments
|
|
$
|
1,820
|
|
$
|
282
|
|
Other
current accrued liabilities
|
|
|
540
|
|
|
153
|
|
Accrued
professional services
|
|
|
407
|
|
|
267
|
|
Accrued
employee benefits
|
|
|
208
|
|
|
487
|
|
Accrued
public reporting charges
|
|
|
154
|
|
|
138
|
|
Total
|
|
$
|
3,129
|
|
$
|
1,327
|
|
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
Use
of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Research
and Development Expenses
We
report
research and development expense net of certain reimbursements we receive from
our collaborators. Our net research and development expenses relate to
(i) research to identify and evaluate new targets and to develop and
evaluate new antibodies and cytotoxic drugs, (ii) preclinical testing of
our own and, in certain instances, our collaborators' product candidates, and
the cost of our own clinical trials, (iii) development related to clinical
and commercial manufacturing processes and (iv) manufacturing operations.
Our research and development efforts have been primarily focused in the
following areas:
§
|
activities
pursuant to our discovery, development and commercialization agreement
with sanofi-aventis;
|
§
|
activities
related to the preclinical and clinical development of huN901-DM1
and
huC242-DM4;
|
§
|
process
development related to production of the huN901 antibody and huN901-DM1
conjugate for clinical materials;
|
§
|
process
development
related to production of the huC242 antibody and huC242-DM4 conjugate
for
clinical materials;
|
§
|
process
improvements related to the production of DM1, DM4 and strain development
of their precursor, ansamitocin P3;
|
§
|
funded
development activities with contract manufacturers for the huN901antibody,
the huC242 antibody and DM1, DM4 and their precursor, ansamitocin
P3.
|
§
|
operation
and maintenance of our conjugate manufacturing
plant;
|
§
|
process
improvements to our TAP technology;
|
§
|
identification
and evaluation of potential antigen
targets;
|
§
|
evaluation
of internally developed and in-licensed antibody candidates;
and
|
§
|
development
and evaluation of additional cytotoxic
agents.
|
Income
Taxes
The
Company uses the liability method to account for income taxes. Deferred tax
assets and liabilities are determined based on differences between the financial
reporting and income tax basis of assets and liabilities, as well as net
operating loss carry forwards and tax credits and are measured using the enacted
tax rates and laws that will be in effect when the differences reverse. A
valuation allowance against net deferred tax assets is recorded if, based on
the
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
Financial
Instruments and Concentration of Credit Risk
The
Company has no significant off-balance sheet concentration of credit risk such
as foreign exchange contracts, option contracts or other foreign hedging
arrangements. Cash and cash equivalents are primarily maintained with two
financial institutions in the United States. Deposits with banks may exceed
the
amount of insurance provided on such deposits. Generally, these deposits may
be
redeemed upon demand and, therefore, bear minimal risk. Financial instruments
that potentially subject the Company to concentrations of credit risk consist
principally of marketable securities. Marketable securities consist of United
States Treasury bonds, high-grade corporate bonds, asset-backed and United
States government agency securities, banknotes and commercial paper. The
Company's investment policy, approved by the Board of Directors, limits the
amount it may invest in any one type of investment, other than United States
Treasury securities, thereby reducing credit risk concentrations.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
Cash
Equivalents
Cash
equivalents consist principally of money market funds and other investments
with
original maturities of three months or less at the date of purchase at June
30,
2006 and 2005.
Marketable
Securities
The
Company invests in marketable securities of highly rated financial institutions
and investment-grade debt instruments and limits the amount of credit exposure
with any one entity. The Company has classified its marketable securities as
“available-for-sale” and, accordingly, carries such securities at aggregate fair
value. Unrealized gains and losses, if any, are reported as other comprehensive
income (loss) in stockholders’ equity. The amortized cost of debt securities in
this category is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization and accretions are included in interest
income. Realized gains and losses on available-for-sale securities are included
in net realized loss on investments. The cost of securities sold is based on
the
specific identification method. Interest and dividends are included in interest
income.
Property
and
Equipment
Property
and equipment are stated at cost. The Company provides for depreciation based
upon expected useful lives using the straight-line method over the following
estimated useful lives:
Machinery
and
equipment
|
|
3-5
years
|
Computer
hardware
and software
|
|
3-5
years
|
Furniture
and
fixtures
|
|
5
years
|
Leasehold
improvements
|
|
Shorter
of remaining
lease term or estimated useful life
|
Maintenance
and
repairs are charged to expense as incurred. Upon retirement or sale, the cost
of
disposed assets and the related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in the statement of
operations. The Company recorded a $2,000 and $39,000 loss on the disposal
of
certain equipment during the years ended June 30, 2006 and June 30, 2005,
respectively.
Impairment
of
Long-Lived Assets
In
accordance with SFAS No. 144, Accounting for
the Impairment or
Disposal of Long-Lived Assets,
the Company reviews
property, plant, and equipment for impairment whenever events or changes in
circumstances indicate that the carrying amount of such may not be recoverable.
Computation
of Net
Loss Per Common Share
Basic
and
diluted net loss per share is calculated based upon the weighted average number
of common shares outstanding during the period. Diluted net loss per share
incorporates the dilutive effect of stock options, warrants and other
convertible securities. The total number of options and warrants convertible
into ImmunoGen Common Stock and the resulting ImmunoGen Common Stock
equivalents, as calculated in accordance with the treasury-stock accounting
method, are included in the following table (in thousands):
|
|
June
30,
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
Options
and warrants convertible into Common Stock
|
|
5,923
|
|
6,202
|
|
5,595
|
Common
Stock Equivalents
|
|
1,423
|
|
1,633
|
|
1,733
|
ImmunoGen
Common Stock equivalents have not been included in the net loss per share
calculation because their effect is anti-dilutive due to the Company’s net loss
position.
Stock-Based
Compensation
As
of June
30, 2006, the Company has one share-based compensation plan, which is the
ImmunoGen, Inc. Restated Stock Option Plan. The Company’s Restated Stock Option
Plan as amended, or the Plan, which is shareholder-approved, permits the grant
of share options to its employees, consultants and directors for up to 8.55
million shares of common stock. Option awards are granted with an exercise
price
equal to the market price of the Company’s stock at the date of grant. Options
vest at various periods of up to four years and may be exercised within ten
years of the date of grant. Generally, upon share option exercise, the Company
issues new shares and delivers the shares as to which the option was exercised
to the participant.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
Effective
July 1, 2005, the Company adopted the fair value recognition provisions of
Financial Accounting Standards Board (FASB) Statement 123(R), Share-Based
Payment (Statement
123(R)), using the modified-prospective-transition method. Under that transition
method, compensation cost recognized for fiscal year 2006 includes: (a)
compensation cost for all share-based payments granted, but not yet vested
as of
July 1, 2005, based on the grant-date fair value estimated in accordance with
the original provisions of Statement 123 (as defined below), and (b)
compensation cost for all share-based payments granted subsequent to July 1,
2005, based on the grant-date fair value estimated in accordance with the
provisions of Statement 123(R). Such amounts have been reduced by the
Company’s estimate of forfeitures of all unvested awards. Prior to July 1, 2005,
the Company accounted for its stock-based compensation plans under the
recognition and measurement provisions of Accounting Principles Board Opinion
No. 25, “Accounting for Stock Issued to Employees” (APB 25), and related
interpretations for all awards granted to employees. Under APB 25, when the
exercise price of options granted to employees under these plans equals the
market price of the common stock on the date of grant, no compensation expense
is recorded. When the exercise price of options granted to employees under
these plans is less than the market price of the common stock on the date of
grant, compensation expense is recognized over the vesting period. Results
for prior periods have not been restated. For stock options granted to
non-employees, the Company recognizes compensation expense in accordance with
the requirements of Statement of Financial Accounting Standards (SFAS)
No. 123, “Accounting for Stock Based Compensation” (Statement
123). Statement 123 requires that companies recognize compensation expense
based on the estimated fair value of options granted to non-employees over
their
vesting period, which is generally the period during which services are rendered
by such non-employees.
As
a
result of adopting Statement 123(R) on July 1, 2005, the Company’s net loss for
the year ended June 30, 2006 is $2.4 million, or $0.06 per share, greater than
if it had continued to account for share-based compensation under APB 25.
The
following table illustrates the effect on net loss and net loss per share if
the
Company had applied the fair value recognition provisions of Statement 123
to
options granted under the Company’s stock option plans. For purposes of this
pro-forma disclosure, the value of the options is estimated using a
Black-Scholes option-pricing model and amortized to expense over the
options’ vesting periods (in thousands, except per share data).
|
|
Fiscal
Years
Ended June 30,
|
|
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
Net
loss, as reported
|
|
$
|
(10,951
|
)
|
$
|
(5,917
|
)
|
|
|
|
|
|
|
|
|
Add:
Total
stock-based compensation expense determined under the intrinsic value
method for all employee awards
|
|
|
11
|
|
|
13
|
|
|
|
|
|
|
|
|
|
Deduct:
Total
stock-based compensation expense determined under the fair value
method
for all employee awards
|
|
|
(2,832
|
)
|
|
(4,530
|
)
|
|
|
|
|
|
|
|
|
Net
loss, pro forma
|
|
$
|
(13,772
|
)
|
$
|
(10,434
|
)
|
|
|
|
|
|
|
|
|
Basic
and diluted
net loss per common share, as reported
|
|
$
|
(0.27
|
)
|
$
|
(0.15
|
)
|
|
|
|
|
|
|
|
|
Basic
and diluted
net loss per common share, pro forma
|
|
$
|
(0.34
|
)
|
$
|
(0.26
|
)
|
The
fair
value of each stock option is estimated on the date of grant using the
Black-Scholes option-pricing model using the assumptions noted in the following
table. Expected volatility is based exclusively on historical volatility data
of
the Company’s stock. The expected term of stock options granted is based
exclusively on historical data and represents the period of time that stock
options granted are expected to be outstanding. The expected term is calculated
for and applied to one group of stock options as the Company does not expect
substantially different exercise or post-vesting termination behavior amongst
its employee population. The risk-free rate of the stock options is based
on the United States Treasury rate in effect at the time of grant for the
expected term of the stock options.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
|
Year
Ended
June 30,
|
|
2006
|
|
2005
|
|
2004
|
Dividend
|
None
|
|
None
|
|
None
|
Volatility
|
84.76%
|
|
89.87%
|
|
94.26%
|
Risk-free
interest
rate
|
4.83%
|
|
3.70%
|
|
3.71%
|
Expected
life
(years)
|
6.5
|
|
5.9
|
|
5.5
|
Using the Black-Scholes option-pricing model, the weighted average grant date
fair values of options granted during fiscal 2006, 2005 and 2004 was $2.78,
$4.15, and $4.94 per share, respectively.
A
summary
of option activity under the Plan as of June 30, 2006, and changes during the
twelve month period then ended is presented below (in thousands, except
weighted-average data):
|
|
Number
of Stock Options
|
|
Weighted-Average
Exercise Price
|
|
Weighted-Average
Remaining Life in Years
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2005
|
|
|
5,862
|
|
$
|
6.73
|
|
|
|
|
|
|
Granted
|
|
|
802
|
|
|
3.68
|
|
|
|
|
|
|
Exercised
|
|
|
(454)
|
|
|
2.53
|
|
|
|
|
|
|
Forfeited/Canceled
|
|
|
(287)
|
|
|
8.93
|
|
|
|
|
|
|
Outstanding
at June 30, 2006
|
|
|
5,923
|
|
$
|
6.53
|
|
|
5.91
|
|
$
|
2,115
|
Exercisable
at June 30, 2006
|
|
|
4,307
|
|
$
|
7.21
|
|
|
1.93
|
|
$
|
2,112
|
As
of June
30, 2006, the estimated fair value of unvested employee awards was $5.0 million,
net of estimated forfeitures. The weighted-average remaining vesting period
for
these awards is approximately 2.0 years.
A
summary
of option activity for shares vested during the fiscal years ended June 30,
2006, 2005 and 2004 is presented below (in thousands):
|
|
Year
Ended
June 30,
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Total
fair value of
shares vested
|
|
$
|
2,488
|
|
$
|
2,619
|
|
$
|
6,267
|
Total
intrinsic
value of options exercised
|
|
|
920
|
|
|
848
|
|
|
741
|
Cash
received for
exercise of stock options
|
|
|
1,150
|
|
|
528
|
|
|
599
|
On
February 1, 2006, the Company’s Board of Directors approved certain changes to
the ImmunoGen, Inc. Restated Stock Option Plan (the Plan). The amendments
provide that in the event of a Change of Control of the Company all options
outstanding under the Plan shall become fully vested and immediately exercisable
as of the date of the Change of Control. This provision shall apply to all
options currently outstanding under the Plan and all new options granted on
or
after the date of the amendment. At the time of the amendments, the Company
was
not involved in any transactions or discussions thereof that would constitute
a
Change in Control. The amendments did not have an impact on the Company’s
statement of operations.
During
the year ended June 30, 2006, the Company recorded approximately $31,000 of
compensation expense related to the modification of certain outstanding common
stock options.
Comprehensive
Loss
The
Company presents comprehensive loss in accordance with SFAS 130, “Reporting
Comprehensive Income.” Comprehensive
loss is
comprised of the Company’s net loss for the period and unrealized gains and
losses recognized on available-for-sale marketable securities.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary
of Significant Accounting Policies (Continued)
Segment
Information
During
the
three fiscal years ended June 30, 2006, the Company continued to operate in
one
reportable business segment under the management approach of SFAS No. 131,
“Disclosures about Segments of an Enterprise and Related Information,” which is
the business of discovery of monoclonal antibody-based cancer
therapeutics.
Revenues
from sanofi-aventis accounted for approximately 72%, 63% and 61% of revenues
for
the years ended June 30, 2006, 2005 and 2004, respectively. Revenues from
Genentech accounted for approximately 16%, 5% and 8% of revenues for the years
ended June 30, 2006, 2005 and 2004, respectively. Revenues from Boehringer
Ingelheim accounted for approximately 0%, 13% and 28% of revenues for the years
ended June 30, 2006, 2005 and 2004, respectively. Revenues from Millennium
Pharmaceuticals accounted for 2%, 13% and 16% of revenues for the years ended
June 30, 2006, 2005 and 2004 respectively. Revenues from Vernalis accounted
for
approximately 0%, 2% and 10% of revenues for the years ended June 30, 2006,
2005
and 2004, respectively. There were no other significant customers of the Company
in fiscal 2006, 2005 and 2004.
Recent
Accounting Pronouncements
In
June
2005, the FASB issued SFAS No. 154, Accounting
Changes and Error Corrections,
which
will require entities that voluntarily make a change in accounting principle
to
apply that change retrospectively to prior periods’ financial statements, unless
this would be impracticable. SFAS No. 154 supersedes APB Opinion No. 20,
Accounting
Changes,
which
previously required that most voluntary changes in accounting principle be
recognized by including in the current period’s net income the cumulative effect
of changing to the new accounting principle. SFAS No. 154 also makes a
distinction between “retrospective application” of an accounting principle and
the “restatement” of financial statements to reflect the correction of an error.
Another significant change in practice under SFAS No. 154 will be that if an
entity changes its method of depreciation, amortization, or depletion for
long-lived, non-financial assets, the change must be accounted for as a change
in accounting estimate. Under APB No. 20, such a change would have been reported
as a change in accounting principle. SFAS No. 154 applies to accounting changes
and error corrections that are made in fiscal years beginning after December
15,
2005. We do not expect the adoption of this pronouncement to have a material
effect on the Company’s financial position or results of
operations.
In
July
2006, the Financial Accounting Standards Board (FASB) issued Financial
Interpretation No. (FIN) 48, Accounting
for
Uncertainty in Income Taxes, which
applies to all tax
positions related to income taxes subject to SFAS No. 109 (SFAS 109),
Accounting
for Income
Taxes.
This includes tax positions considered to be “routine” as well as those with a
high degree of uncertainty. FIN 48 utilizes a two-step approach for evaluating
tax positions. Recognition (step one) occurs when an enterprise concludes that
a
tax position, based solely on its technical merits, is more-likely-than-not
to
be sustained upon examination. Measurement (step two) is only addressed if
step
one has been satisfied (i.e., the position is more-likely-than-not to be
sustained). Under step two, the tax benefit is measured as the largest amount
of
benefit, determined on a cumulative probability basis that is
more-likely-than-not to be realized upon ultimate settlement. FIN 48’s use of
the term “more-likely-than-not” in steps one and two is consistent with how that
term is used in SFAS 109 (i.e., a likelihood of occurrence greater than 50
percent).
Those
tax
positions failing to qualify for initial recognition are recognized in the
first
subsequent interim period they meet the more-likely-than-not standard, or are
resolved through negotiation or litigation with the taxing authority, or upon
expiration of the statute of limitations. Derecognition of a tax position that
was previously recognized would occur when a company subsequently determines
that a tax position no longer meets the more-likely-than-not threshold of being
sustained. FIN 48 specifically prohibits the use of a valuation allowance as
a
substitute for derecognition of tax positions. Additionally, FIN 48 requires
expanded disclosure requirements, which include a tabular rollforward of the
beginning and ending aggregate unrecognized tax benefits as well as specific
detail related to tax uncertainties for which it is reasonably possible the
amount of unrecognized tax benefit will significantly increase or decrease
within twelve months.
These disclosures are
required at each annual reporting period unless a significant change occurs
in
an interim period. FIN 48 is effective for fiscal years beginning after
December 15, 2006 (fiscal 2008 for the Company). The Company is currently
evaluating the impact of the adoption of FIN 48, but does not believe the
adoption will have material impact on its results of operation.
C.
Agreements
Out-Licenses
Sanofi-Aventis
In
July 2003, the Company and Aventis Pharmaceuticals, Inc. (now the
sanofi-aventis Group) entered into a broad collaboration agreement to discover,
develop and commercialize anticancer therapeutics. The agreement provides
sanofi-aventis with worldwide commercialization rights to new product candidates
created through the collaboration as well as worldwide commercialization rights
to three of the then most advanced product candidates in ImmunoGen's pipeline:
a
TAP compound for acute myeloid leukemia (AVE9633), anti-IGF-1R antibody
(AVE1642), and an anti-CD19 TAP compound for certain B-cell malignancies
(SAR3419). The overall term of
the
agreement extends to the later of the latest patent to expire or 12 years
after the latest launch of any product discovered, developed and/or
commercialized under the agreement. The agreement provides that ImmunoGen is
entitled to receive a minimum of $50.7 million of committed research
funding during a three-year research program period. Sanofi-aventis has the
option, with 12 months' advance notice, to request that ImmunoGen extend
the research program for two additional 12-month periods. Sanofi-aventis paid
ImmunoGen an upfront fee of $12.0 million in August 2003. The Company
has deferred the upfront fee and is recognizing it as revenue over ImmunoGen’s
estimated period of substantial involvement. The Company estimates this period
to be five years, which includes the term of the collaborative research program
in addition to two 12-month extensions that sanofi-aventis may exercise.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
C. Agreements (Continued)
In
August
2005, sanofi-aventis exercised the first of its two options to extend the term
of the research collaboration with the Company for another year, and committed
to pay the Company a minimum of $18.2 million in research and support over
the
twelve months beginning September 1, 2006. This funding is in addition to the
$50.7 million in research support already committed for the three-year period
ending August 31, 2006. If sanofi-aventis requests a second extension of the
research program for an additional period, the Company and sanofi-aventis will
negotiate the research funding level for such extension period at the time
such
extension is requested. Sanofi-aventis must notify the Company no later than
August 31, 2006 if they intend to extend the research program for the second
additional 12-month period that begins in September 2007.
The
collaboration agreement also provides for certain other payments based on the
achievement of product candidate milestones and royalties on sales of any
resulting products, if and when such sales commence. Assuming all benchmarks
are
met, the Company will receive milestone payments of between $21.5 million
and $30.0 million per antigen target. The agreement provides ImmunoGen an
option to certain co-promotion rights in the United States on a
product-by-product basis. Sanofi-aventis will be responsible for product
development, manufacturing, and commercialization, and will cover all associated
costs for any products created through the collaboration. ImmunoGen will be
reimbursed for any preclinical and clinical materials that it makes under the
agreement.
The
terms
of the Company's collaboration agreement with sanofi-aventis place certain
restrictions upon ImmunoGen. Subject to the Company's obligations under its
other collaboration agreements that were in effect at the time the Company
signed the collaboration agreement with sanofi-aventis, (i) ImmunoGen may
only enter into a specified number of additional single target collaboration
agreements and (ii) during the term of the collaborative research program
and for a specified period thereafter, ImmunoGen is prohibited from entering
into any single target license, other than with sanofi-aventis, utilizing the
Company's TAP technology to bind any taxane effector molecule to any antibody.
Any new oncology targeting antibodies discovered by ImmunoGen during the term
of
the collaboration must be made available to sanofi-aventis for their potential
further development. Additionally, the terms of the collaboration agreement
allow sanofi-aventis to elect to terminate ImmunoGen's participation in the
research program and/or the Company's co-promotion rights upon a change of
control of ImmunoGen.
In
September 2004, sanofi-aventis confirmed that one of the product candidates
under its agreement with the Company had achieved a certain milestone. The
achievement of this milestone, under the terms of the sanofi-aventis agreement,
triggered a payment of $500,000 from sanofi-aventis to ImmunoGen. Additionally,
in March 2005, sanofi-aventis informed ImmunoGen that it initiated clinical
testing of one of the product candidates under its agreement with the Company,
the anti-CD33 TAP compound AVE9633, which triggered the receipt and recognition
of $2 million related to the achievement of this milestone. These milestone
amounts are included in license and milestone fees for the fiscal year ended
June 30, 2005.
Biogen
Idec,
Inc.
On
October 1, 2004, the Company entered into a development and license agreement
with Biogen Idec, Inc. Under the terms of this agreement, Biogen Idec received
exclusive rights to develop and commercialize anticancer therapeutics that
comprise an antibody developed by Biogen Idec that binds to the tumor cell
target Cripto and a maytansinoid cell-killing agent developed by ImmunoGen.
Biogen Idec is responsible for the research, development, manufacturing, and
marketing of any products resulting from the license. Under the terms of the
agreement, the Company received an upfront payment of $1.0 million upon
execution of the agreement. This upfront amount is subject to credit, as
defined, if Biogen Idec does not submit certain regulatory filings by June
30,
2008. As a result, the Company will defer the amount subject to credit until
this deadline lapses or upon the occurrence of the regulatory filing.
Thereafter, the Company will recognize the fee over the estimated remaining
period of substantial involvement. In addition to royalties on future product
sales, when and if such sales commence, the terms of the agreement include
certain other payments upon Biogen Idec’s achievement of milestones. Assuming
all benchmarks are met, ImmunoGen will receive $42.0 million of milestone
payments under this agreement.
Boehringer
Ingelheim
International GmbH
In
November 2001, Boehringer Ingelheim licensed the exclusive right to use
ImmunoGen’s DM1 TAP technologies with antibodies to CD44. Under the terms of the
agreement, the Company received an upfront payment upon commencement of the
agreement and could receive, based upon the exchange rate on November 27,
2001, the effective date of the agreement, approximately $41.5 million in
potential payments upon Boehringer Ingelheim's achievement of certain milestones
in addition to royalty payments
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
C. Agreements (Continued)
on
future
product sales, if and when they commence. In October 2002, Boehringer
Ingelheim confirmed to ImmunoGen that clinical testing of the novel anticancer
agent, bivatuzumab mertansine, composed of ImmunoGen's DM1 effector molecule
and
Boehringer Ingelheim's anti-CD44v6 antibody, had commenced on or about
September 24, 2002. The achievement of this milestone triggered a payment
of $1.0 million from Boehringer Ingelheim to ImmunoGen. The milestone
payment is included in license and milestone fee for the fiscal year ended
June
30, 2003. On February 7, 2005, Boehringer Ingelheim notified the Company that
development of bivatuzumab mertansine had been discontinued. Under the 2001
agreement, Boehringer Ingelheim can use ImmunoGen’s DM1 to create an anticancer
compound to a different antigen target in the event Boehringer Ingelheim chooses
to discontinue development of the anti-CD44v6 TAP compound at an early stage.
The Company has ceased amortization of the remaining portion of the upfront
fee
paid by Boehringer Ingelheim as
it has
retained
its
right to use ImmunoGen’s DM1 TAP technology and has exercised its right to
create an anticancer compound to a different antigen.
Centocor,
Inc.
On
December 23, 2004, the Company entered into a development and license agreement
with Centocor, Inc., a wholly owned subsidiary of Johnson and
Johnson. Under the terms of this agreement, Centocor will receive exclusive
worldwide rights to develop and commercialize anticancer therapeutics that
comprise an antibody developed by Centocor that binds to the cancer target
α
v integrin and a
maytansinoid cell-killing agent developed by ImmunoGen. Centocor will be
responsible for the research, development, manufacturing, and marketing of
any
products resulting from the license. Under the terms of the agreement, the
Company received a non-refundable upfront payment of $1.0 million upon execution
of the agreement. The Company has deferred the upfront payment and will
recognize this amount as revenue over the period of the Company’s substantial
involvement. In addition to royalties on future product sales, when and if
such sales commence, the terms of the agreement include certain other payments
upon Centocor’s achievement of milestones. Assuming all benchmarks are
met, ImmunoGen will receive $42.5 million of milestone payments under this
agreement.
Millennium
Pharmaceuticals, Inc.
In
March 2001, the Company entered into a five-year collaboration agreement
with Millennium. The agreement provides Millennium access to the Company's
TAP
technology for use with Millennium's proprietary antibodies. Millennium acquired
a license to utilize the Company's TAP technology in its antibody product
research efforts and an option to obtain product licenses for a restricted
number of antigen targets during the collaboration. ImmunoGen received a
non-refundable upfront fee of $2.0 million in the third quarter of 2001.
The upfront fee has been deferred and is being recognized over the period during
which Millennium may elect to acquire a license to utilize the Company's TAP
technology with one of Millennium's antibodies. For each license to an antigen
target taken, the collaboration agreement provides for license and milestone
payments potentially totaling approximately $41.0 million and royalties on
sales of any resulting products, if and when such sales commence. Millennium
is
responsible for product development, manufacturing and marketing of any
resulting products. The Company is to be reimbursed for any preclinical and
clinical materials that it makes under the agreement. Pursuant to this
agreement, in February 2002, Millennium signed an exclusive product license
to the Company's maytansinoid technology for use with Millennium's antibody
MLN591. MLN591 is directed towards the extracellular domain of Prostate Specific
Membrane Antigen (PSMA). ImmunoGen received a non-refundable license fee from
Millennium when the license agreement was signed. The license fee was deferred
and is being recognized ratably over the Company's period of substantial
involvement during development.
Pursuant
to this agreement, in February 2002, Millennium licensed the exclusive
right to use the Company’s maytansinoid technology with antibodies targeting the
Prostate-Specific Membrane Antigen (PSMA). In March 2002, the Company
received a license fee from Millennium pursuant to this license agreement.
In
November 2002, Millennium informed ImmunoGen that clinical testing of
MLN2704, comprised of the Company’s cytotoxic agent DM1 and Millennium's MLN591
antibody, had been initiated. This event triggered a milestone payment of
$1.0 million from Millennium to ImmunoGen. On January 25, 2006, Millennium
notified the Company that, as part of its ongoing portfolio management process
and based on the evaluation of recent clinical data in the context of other
opportunities in its pipeline, Millennium had decided not to continue the
development of its MLN2704 compound. Millennium retains its right to use
ImmunoGen’s maytansinoid TAP technology with antibodies targeting PSMA.
The
Company has ceased amortization of the remaining portion of the upfront fee
paid
by Millennium as they retain rights to develop and alternative product candidate
with an antibody targeting PSMA.
On
March
27, 2006, ImmunoGen and Millennium agreed to amend the 2001 agreement which
was
scheduled to expire March 30, 2006. The amendment extends the agreement for
an
additional year, which ends March 30, 2007. In consideration for this extension,
Millennium paid ImmunoGen an extension fee equal to $250,000. The Company will
amortize the extension fee, as well as the remaining upfront fee from the March
2001 agreement through March 2007.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
C.
Agreements (Continued)
Amgen,
Inc. (formerly Abgenix, Inc.)
In
September 2000, the Company entered into a collaboration agreement with
Amgen (formerly Abgenix). The agreement provides Amgen with access to the
Company's maytansinoid technology for use with their antibodies along with
the
ability to acquire both exclusive and nonexclusive options to obtain product
licenses for antigen targets. Each option has a specified option period during
which Amgen may obtain a product license. Under this agreement Amgen has the
right to extend each option period by a specified amount of time in exchange
for
an extension fee. The Company received a total of $5.0 million in
technology access fee payments from Amgen when the agreement was established
and
is entitled to potential milestone payments and royalties on net sales of
resulting products, if and when such sales commence. At June 30, 2006,
$2.7 million of the technology access fees remained as deferred revenue to
be recognized over the period during which Amgen may elect to acquire a license
to utilize the Company's TAP technology with one of their antibodies. On
September 7, 2000, Abgenix purchased $15.0 million of the Company’s
common stock in accordance with the agreement. The Company understands that
this
stock was sold during fiscal 2006. In June 2002, Amgen was granted a
non-exclusive option to acquire a license to another TAP product in exchange
for
a nominal option fee. The non-exclusive option fee was deferred and recognized
over the option period. Amgen may renew the non-exclusive option for an
additional period in exchange for an extension fee. ImmunoGen's agreement with
Amgen will terminate upon expiration of a 10-year term during which the Company
gave Amgen access to its technology.
Vernalis
plc
In
August 2003, Vernalis completed its acquisition of British Biotech. In
connection with the acquisition, the merged company, called
Vernalis plc,
announced that it intended to review its merged product candidate portfolio,
including
its
collaboration with ImmunoGen on huN901-DM1. After discussion with Vernalis,
in January 2004 the Company announced that ImmunoGen would take over future
development of the product candidate. Pursuant to the terms of the termination
agreement dated January 7, 2004, Vernalis retained responsibility for the
conduct and expense of the study it initiated in the United States (Study 001)
until June 30, 2004, and the study it had started in the United Kingdom (Study
002) through completion. The Company took over responsibility for Study 001
on
July 1, 2004 and, in September 2005, announced the initiation of its own
clinical trial with huN901-DM1 in multiple myeloma (Study 003). On December
15,
2005, the Company executed an amendment to the January 7, 2004 Termination
Agreement with Vernalis. Under the terms of the amendment, the Company assumed
responsibility for Study 002 as of December 15, 2005, including the cost of
its
completion. Under the amendment, Vernalis paid the Company $365,000 in
consideration of the expected cost of the obligations assumed by the Company
with the amendment. This $365,000 has been recognized as other income in the
accompanying Consolidated Statements of Operations for the year ended June
30,
2006.
Genentech,
Inc.
In
May 2000, the Company executed two separate licensing agreements with
Genentech. The first agreement grants an exclusive license to Genentech for
ImmunoGen's maytansinoid technology for use with antibodies, such as trastuzumab
(Herceptin®), that target HER2. Under the terms of the agreement, Genentech
receives exclusive worldwide rights to use ImmunoGen’s maytansinoid TAP
technology with antibodies to HER2. Genentech will be responsible for product
development, manufacturing and marketing of any products resulting from the
agreement; ImmunoGen will be reimbursed for any preclinical and clinical
materials that it manufactures under the agreement. ImmunoGen received a
$2.0 million non-refundable payment upon execution of the agreement. In
addition to royalties on net sales, when and if such sales commence, the terms
of the agreement include certain other payments based upon Genentech's
achievement of milestones. Assuming all benchmarks are met, ImmunoGen will
receive $39.5 million of upfront and milestone payments. On May 4, 2006,
the Company and Genentech amended the May 2000 agreement. This amendment
increases the potential milestone payments to ImmunoGen under this agreement
by
$6.5 million to $44 million and the potential royalties to ImmunoGen on any
HER2-targeting TAP compound that may be developed by Genentech, including
trastuzumab-DM1.
The
second agreement with Genentech provides Genentech with broad access to
ImmunoGen's TAP technology for use with Genentech's other proprietary
antibodies. This multi-year agreement provides Genentech with a license to
utilize ImmunoGen's TAP platform in its antibody product research efforts and
an
option to obtain product licenses for a limited number of antigen targets over
the agreement's five-year term. Under this agreement, the Company received
a
non-refundable technology access fee of $3.0 million in May 2000. The
upfront fee was deferred and recognized ratably over the period during which
Genentech may elect obtain product licenses. This agreement also provides for
other payments based upon Genentech's achievement of milestones per antigen
target and royalties on net sales of any resulting products. Assuming all
benchmarks are met, the Company will receive $39.0 million in license and
milestone payments for each antigen target licensed under this agreement.
Genentech will be responsible for manufacturing, product development and
marketing of any products developed through this collaboration. ImmunoGen will
be reimbursed for any preclinical and clinical materials that it manufactures
under the agreement. This May 2000 agreement included a provision that allows
Genentech to renew the agreement for one additional three-year term by payment
of a $2.0 million access fee. On April 27, 2005, Genentech confirmed its
intention to renew the agreement and paid the $2.0 million technology access
fee
to ImmunoGen.
On
April 27, 2005, July 22, 2005 and December 12, 2005, Genentech licensed
exclusive rights to use ImmunoGen’s maytansinoid TAP technology with its
antibodies to three undisclosed targets. These licenses are in addition to
the
existing agreement between the companies that grants Genentech exclusive rights
to use ImmunoGen’s technology with therapeutic antibodies to HER2. Under the
terms defined in the May 2000 agreement, ImmunoGen received a $1.0 million
license fee for each license, and is entitled to receive
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
C.
Agreements (Continued)
milestone
payments;
ImmunoGen also is entitled to receive royalties on the sales of any resulting
products. Genentech is responsible for the development, manufacturing, and
marketing of any products resulting from the licenses.
On
January 27, 2006, Genentech notified the Company that the trastuzumab-DM1
Investigational New Drug application submitted by Genentech to the FDA had
become effective. Under the terms of the May 2000 exclusive license agreement
for the HER2 target, this event triggered a $2.0 million milestone payment
to
the Company. This milestone is included in license and milestone fees for the
fiscal year ended June 30, 2006.
Other
Agreements
BioInvent
International AB
In
December 2002, the Company entered into a supply agreement with BioInvent
International AB to produce monoclonal antibody that is a component of one
of
the products that the Company licensed to sanofi-aventis. The Company prepaid
$433,000 upon the signing of the agreement. The Company made payments and
recorded as research and development expense $818,000 during the year ended
June
30, 2004 based upon other milestones included in the supply agreement. As of
June 30, 2004, the Company had received delivery of a portion of material under
this monoclonal antibody supply agreement. Sanofi-aventis reimbursed ImmunoGen
$1.3 million, the total cost of the antibody. The Company recorded the
reimbursement as other income during the year ended June 30, 2004.
In
June
2006, the Company entered into a supply agreement with BioInvent AB to produce
additional quantities of a monoclonal antibody pursuant to the cGMP
requirements. Under the terms of the agreement, the Company agreed to pay a
stated price per manufactured batch of antibody, subject to adjustment as set
forth in the agreement.
Diosynth
RTP,
Inc.
In
August
2005, the Company entered into a bioprocessing services agreement with Diosynth
RTP, Inc. (Diosynth). Under the terms of the agreement, Diosynth agreed to
perform technology transfer, process development and scale-up of the antibody
component of one of the Company’s product candidates pursuant to the cGMP
requirements. Under the terms of the agreement, the Company agreed to pay
Diosynth a stated price for the technology transfer and process development.
Laureate
Pharma, L.P.
In
April
2004, the Company entered into a monoclonal antibody supply agreement with
Laureate Pharma, L.P. (Laureate). Under the terms of the agreement, Laureate
agreed to perform process qualification and manufacture one of the Company’s
monoclonal antibodies pursuant to the cGMP requirements. Under the terms of
the
agreement, the Company agreed to pay a stated price per manufactured batch
of
antibody, subject to adjustment as set forth in the agreement.
In
December 2005, the Company entered into a monoclonal antibody supply agreement
with Laureate to produce additional quantities of the monoclonal antibody
pursuant to the cGMP requirements. Under the terms of the agreement, the Company
agreed to pay a stated price per manufactured batch of antibody, subject to
adjustment as set forth in the agreement.
Società
Italiana Corticosteroidi S.r.l (SICOR)
Effective
November 2004 the Company entered into a technology transfer and development
agreement with SICOR. Under the terms of the agreement, SICOR agreed to perform
a feasibility study and full process development work to produce DM1, a
component of its TAP products. Under the terms of the agreement, the Company
agreed to pay SICOR a stated price for work performed based on achievement
of
certain milestone events. On June 21, 2006, the Company amended the 2004
technology transfer and development agreement with SICOR. Under the terms of
the
amendment, SICOR will also provide preparatory activities in order to scale-up
the production of ansamitocin, a precursor to DMx compounds, in anticipation
of
large-scale production of ansamitocin and DM1 to be used in TAP compounds for
later-stage clinical trials and commercialization.
D.
Marketable
Securities
As
of
June 30, 2006, $4.8 million in cash and money market funds were classified
as
cash and cash equivalents. The Company’s cash, cash equivalents and marketable
securities as of June 30, 2006 are as follows (in thousands):
|
|
Amortized
Cost
|
|
Gross
Unrealized Gains
|
|
Gross
Unrealized Losses
|
|
Estimated
Fair Value
|
|
Cash
and money
market funds
|
|
$
|
4,813
|
|
$
|
-
|
|
$
|
-
|
|
$
|
4,813
|
|
Commercial
paper
|
|
|
350
|
|
|
-
|
|
|
-
|
|
|
350
|
|
Government
treasury
notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
|
4,392
|
|
|
6
|
|
|
-
|
|
|
4,398
|
|
Due
in one to three years
|
|
|
3,953
|
|
|
-
|
|
|
(8
|
)
|
|
3,945
|
|
Federal
agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
|
1,397
|
|
|
2
|
|
|
-
|
|
|
1,399
|
|
Due
in one to three years
|
|
|
5,345
|
|
|
-
|
|
|
(50
|
)
|
|
5,295
|
|
Asset-backed
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
|
23,168
|
|
|
6
|
|
|
(51
|
)
|
|
23,123
|
|
Due
in one to three years
|
|
|
6,007
|
|
|
-
|
|
|
(83
|
)
|
|
5,924
|
|
Corporate
notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
|
14,379
|
|
|
-
|
|
|
(46
|
)
|
|
14,717
|
|
Due
in one to three years
|
|
|
11,573
|
|
|
-
|
|
|
(130
|
)
|
|
11,059
|
|
Total
|
|
$
|
75,377
|
|
$
|
14
|
|
$
|
(368
|
)
|
$
|
75,023
|
|
Less
amounts
classified as cash and cash equivalents
|
|
|
(4,813
|
)
|
|
- |
|
|
- |
|
|
(4,813
|
)
|
Total
marketable
securities
|
|
$
|
70,564
|
|
$
|
14
|
|
$
|
(368
|
)
|
$
|
70,210
|
|
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
D.
Marketable Securities (Continued)
As
of
June 30, 2005, $3.4 million in cash and money market funds were classified
as
cash and cash equivalents. The Company’s cash, cash equivalents and marketable
securities as of June 30, 2005 are as follows (in thousands):
|
|
Amortized
Cost
|
|
Gross
Unrealized Gains
|
|
Gross
Unrealized Losses
|
|
Estimated
Fair Value
|
|
Cash
and money
market funds
|
|
$
|
3,423
|
|
$
|
-
|
|
$
|
-
|
|
$
|
3,423
|
|
Commercial
paper
|
|
|
988
|
|
|
-
|
|
|
-
|
|
|
988
|
|
Government
treasury
notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
|
30,793
|
|
|
20
|
|
|
(19
|
)
|
|
30,794
|
|
Federal
agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
|
11,930
|
|
|
-
|
|
|
(14
|
)
|
|
11,916
|
|
Due
in one to three years
|
|
|
994
|
|
|
-
|
|
|
-
|
|
|
994
|
|
Asset-backed
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
|
25,189
|
|
|
4
|
|
|
(73
|
)
|
|
25,120
|
|
Due
in one to three years
|
|
|
1,554
|
|
|
-
|
|
|
(2
|
)
|
|
1,552
|
|
Corporate
notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
|
15,788
|
|
|
2
|
|
|
(12
|
)
|
|
15,778
|
|
Total
|
|
$
|
90,659
|
|
$
|
26
|
|
$
|
(120
|
)
|
$
|
90,565
|
|
Less
amounts
classified as cash and cash equivalents
|
|
|
3,423
|
|
|
-
|
|
|
-
|
|
|
3,423
|
|
Total
marketable
securities
|
|
$
|
87,236
|
|
$
|
26
|
|
$
|
(120
|
)
|
$
|
87,142
|
|
In
2006, the Company realized losses of $45,000 and realized gains of $18,000.
In
2005, the Company realized losses of $81,000 and no realized gains. In 2004,
realized losses totaled $64,000 and realized gains totaled $6,000.
The
aggregate fair value of investments with unrealized losses was approximately
$55.9 million, of which $1.8 million have been in an unrealized loss position
for more than one year, as of June 30, 2006. All such other investments as
of
June 30, 2006 have been or were in an unrealized loss position for less than
a
year. The aggregate fair value of investments with unrealized losses was
approximately $71.4 million as of June 30, 2005, all of which have been or
were
in an unrealized loss position for less than a year. . The Company reviews
its
investments for other than temporary impairment whenever the fair value of
an
investment is less than the amortized cost and evidence indicates that an
investment’s carrying value is not recoverable within a reasonable period of
time. Investments in an unrealized loss position were caused by fluctuations
in
interest rates. The Company reviewed its investments with unrealized losses
and
has concluded that no other-than-temporary impairment existed at June 30, 2006
and 2005.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
E.
Property and
Equipment
Property
and equipment
consisted of the following at June 30, 2006 and 2005 (in
thousands):
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
Leasehold
improvements
|
|
$
|
15,934
|
|
$
|
15,776
|
|
Machinery
and equipment
|
|
|
9,879
|
|
|
8,354
|
|
Computer
hardware and software
|
|
|
1,695
|
|
|
1,315
|
|
Furniture
and fixtures
|
|
|
470
|
|
|
361
|
|
Assets
under construction
|
|
|
24
|
|
|
87
|
|
|
|
$
|
28,002
|
|
$
|
25,893
|
|
Less
accumulated depreciation
|
|
|
(18,683
|
)
|
|
(16,010
|
)
|
Property
and equipment, net
|
|
$
|
9,319
|
|
$
|
9,883
|
|
Depreciation
expense was
approximately $2.7 million, $2.2 million and $1.3 million for the years ended
June 30, 2006, 2005 and 2004, respectively.
F.
Income
Taxes
The
difference between the Company’s expected tax benefit, as computed by applying
the United States federal corporate tax rate of 34% to loss before the provision
for income taxes, and actual tax is reconciled in the following chart (in
thousands):
|
|
Year
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
Loss
before income
tax expense
|
|
$
|
(17,817
|
)
|
$
|
(10,922
|
)
|
$
|
(5,871
|
)
|
Expected
tax benefit
at 34%
|
|
$
|
(6,058
|
)
|
$
|
(3,713
|
)
|
$
|
(1,996
|
)
|
State
tax benefit
net of federal benefit
|
|
|
(1,117
|
)
|
|
(685
|
)
|
|
(368
|
)
|
Unbenefitted
losses
|
|
|
5,045
|
|
|
4,525
|
|
|
2,403
|
|
Other
|
|
|
2,147
|
|
|
(98
|
)
|
|
7
|
|
Income
tax
provision
|
|
$
|
17
|
|
$
|
29
|
|
$
|
46
|
|
At
June 30, 2006, the Company has net operating loss carryforwards of approximately
$182.4 million available to reduce federal taxable income that expire in 2007
through 2026 and $74.2 million available to reduce state taxable income that
expire in fiscal 2007 through fiscal 2011. A portion of such carryforwards
related to the exercise of stock options and the related tax benefit will result
in an increase in additional paid-in capital if and when realized. The Company
also has federal and state research tax credits of approximately $11.2 million
available to offset federal and state income taxes, which expire beginning
in
fiscal 2007. Due to the degree of uncertainty related to the ultimate use of
the
loss carryforwards and tax credits, the Company has established a valuation
allowance to fully reserve these tax benefits.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F.
Income Taxes
(Continued)
Deferred
income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the Company’s
deferred tax assets as of June 30, 2006 and 2005 are as follows (in
thousands):
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$
|
66,652
|
|
$
|
61,277
|
|
Research
and development tax credit carryforwards
|
|
|
9,648
|
|
|
8,980
|
|
Capitalized
research costs
|
|
|
262
|
|
|
544
|
|
Property
and other intangible assets
|
|
|
2,869
|
|
|
2,690
|
|
Deferred
revenue
|
|
|
6,455
|
|
|
7,575
|
|
Stock
compensation
|
|
|
37
|
|
|
-
|
|
Other
liabilities
|
|
|
658
|
|
|
347
|
|
Total
deferred tax assets
|
|
$
|
86,581
|
|
$
|
81,413
|
|
Valuation
allowance
|
|
|
(86,581
|
)
|
|
(81,413
|
)
|
Net
deferred tax assets
|
|
$
|
-
|
|
$
|
-
|
|
The
valuation allowance increased by $5.2 million during 2006 due primarily to
an
increase in net operating loss carryforwards related to the Company’s net loss
offset by write-offs of expiring federal and state net operating loss carry
forwards and research and development credits.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
G.
Capital
Stock
Warrants
In
connection with ImmunoGen’s November 2000 public offering of stock, the Company
issued an existing holder of ImmunoGen warrants an additional warrant to acquire
340,000 shares of common stock at an exercise price of $38.00 per share. The
warrants expired in November 2005.
Common
Stock
Reserved
At
June
30, 2006, the Company has reserved 6.446 million shares of authorized common
stock for the future issuance of shares under the Company's Restated Stock
Option Plan and the 2001 Non-Employee Director Stock Plan.
Stock
Options
Under
the
Company's Restated Stock Option Plan, as amended (the Plan), employees,
consultants and directors may be granted options to purchase shares of common
stock of the Company. Options vest at various periods of up to four years and
may be exercised within ten years of the date of grant.
On
November 9, 2004, the shareholders of the Company approved amendments to the
Restated Stock Option Plan to increase the aggregate shares for which stock
options may be granted under the Plan from 7.350 million to 8.550 million.
The
Plan was also amended to ensure that non-qualified options issued under the
Plan
do not have a price per share less than fair market value on the date of grant.
Further, the Plan was amended to require shareholder approval of material
amendments to the Plan. In addition to options granted under the Plan, the
Board
previously approved the granting of other non-qualified options. On
February 1, 2006, the Company's Board of Directors approved certain changes
to
the Plan. These amendments provide that, in the event of a Change of Control of
the Company, all options outstanding under the Plan shall become fully vested
and immediately exercisable as of the date of the Change of Control. This
provision shall apply to all options currently outstanding under the Plan and
all new options granted on or after the date of the amendment. At the time
of
the amendments, the Company stated that it was not involved in any transactions
or discussions thereof that would constitute a Change in Control. The amendments
did not have an impact on the Company's statement of operations.
During
the year ended June 30, 2006, holders of options issued under the Plan exercised
their rights to acquire an aggregate of 454,219 shares of common stock at prices
ranging from $0.84 to $6.27 per share. The total proceeds to the Company
from these option exercises were approximately $1.2 million.
Information
related to
stock option activity under the Plan during fiscal years 2006, 2005 and 2004
is
as follows (in thousands except per share data):
|
|
Options
Issued
Under
the Plan
|
|
|
|
Number
of Stock Options
|
|
Weighted-
Average Exercise Price
|
|
Outstanding
at June 30, 2003
|
|
|
5,087
|
|
$
|
6.89
|
|
Granted
|
|
|
682
|
|
|
6.53
|
|
Exercised
|
|
|
(194
|
)
|
|
3.08
|
|
Forfeited
|
|
|
(256
|
)
|
|
9.91
|
|
Expired
|
|
|
(64
|
)
|
|
6.63
|
|
Outstanding
at June 30, 2004
|
|
|
5,255
|
|
$
|
6.84
|
|
Granted
|
|
|
1,106
|
|
|
5.48
|
|
Exercised
|
|
|
(231
|
)
|
|
2.29
|
|
Forfeited
|
|
|
(267
|
)
|
|
7.56
|
|
Expired
|
|
|
(1
|
)
|
|
2.06
|
|
Outstanding
at June 30, 2005
|
|
|
5,862
|
|
$
|
6.73
|
|
Granted
|
|
|
802
|
|
|
3.68
|
|
Exercised
|
|
|
(454
|
)
|
|
2.53
|
|
Forfeited
|
|
|
(284
|
)
|
|
9.87
|
|
Expired
|
|
|
(3
|
)
|
|
2.76
|
|
Outstanding
at June 30, 2006
|
|
|
5,923
|
|
$
|
6.53
|
|
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
G.
Capital Stock
(Continued)
The
following table summarizes the aggregate information about total stock options
outstanding under the Plan at June 30, 2006:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
Range
of Exercise Prices
|
|
Number
Outstanding
|
|
Weighted-Average
Remaining Contractual Life (Years)
|
|
Weighted-Average
Exercise Price
|
|
Number
Exercisable
|
|
Weighted-Average
Exercise Price
|
$
0.84 - 2.25
|
|
|
1,195
|
|
|
1.80
|
|
$
|
1.40
|
|
|
1,193
|
|
$
|
1.40
|
2.30
- 3.95
|
|
|
1,751
|
|
|
7.62
|
|
|
3.61
|
|
|
1,117
|
|
|
3.84
|
3.99
- 6.27
|
|
|
1,387
|
|
|
8.57
|
|
|
5.62
|
|
|
536
|
|
|
5.84
|
6.28
- 20.75
|
|
|
1,582
|
|
|
4.79
|
|
|
14.27
|
|
|
1,453
|
|
|
14.89
|
38.69
- 39.13
|
|
|
8
|
|
|
4.35
|
|
|
38.87
|
|
|
8
|
|
|
38.87
|
|
|
|
5,923
|
|
|
|
|
|
|
|
|
4,307
|
|
|
|
The
Company has granted options at the fair market value of the common stock on
the
date of such grant. The following options and their respective weighted-average
exercise prices per share were exercisable at June 30, 2006, 2005 and
2004:
|
|
Exercisable
|
|
Weighted-Average
Exercise Price
|
|
|
|
|
|
June
30,
2006
|
|
|
4,307
|
|
$
|
7.21
|
June
30,
2005
|
|
|
4,250
|
|
$
|
7.11
|
June
30,
2004
|
|
|
3,888
|
|
$
|
7.19
|
2001
Non-Employee Director Stock Plan
In
November 2001, the Company's shareholders approved the establishment of the
2001 Non-Employee Director Stock Plan, or the Director Plan, and 50,000 shares
of common stock to be reserved for grant thereunder. The Director Plan provides
for the granting of awards to Non-Employee Directors and, at the election of
Non-Employee Directors, to have all or a portion of their awards in the form
of
cash, stock, or stock units. All stock or stock units are immediately vested.
The number of stock or stock units to be issued is determined by the market
value of the Company's common stock on the last date of the Company's fiscal
quarter for which the services are rendered. The Director Plan is administered
by the Board of Directors which is authorized to interpret the provisions of
the
Director Plan, determine which Non-Employee Directors will be granted awards,
and determine the number of shares of stock for which a stock right will be
granted. The Director Plan was replaced in 2004 by the 2004 Non-Employee
Director Compensation and Deferred Share Unit Plan.
Pursuant
to the Director Plan, during the year ended June 30, 2005, the Company
recorded $34,000 in compensation expense related to the issuance of 6,000 stock
units issued in June 2004. During the year ended June 30, 2004, the Company
recorded $66,000 in compensation expense related to the issuance of 13,000
stock
units and 5,000 shares of common stock. The value of the stock units is adjusted
to market value at each reporting period.
During
the
year ended June 30, 2006, the Company recaptured approximately $64,000 of
previously recorded compensation expense related to stock units outstanding
under the Company's 2001 Non-Employee Director Stock Plan (a stock appreciation
right plan). No stock units have been issued under the 2001 Plan subsequent
to
June 30, 2004.
2004
Non-Employee Director Compensation and Deferred Share Unit
Plan
In
June
2004, the Board of Directors approved the establishment of the 2004 Non-Employee
Director Compensation and Deferred Share Unit Plan, or the 2004 Director Plan.
The 2004 Director Plan provides for the granting of awards to Non-Employee
Directors and, at their discretion, to have all or a portion of their awards
in
the form of cash or deferred share units. The deferred share units vest as
to
one-twelfth monthly. The number of deferred share units to be issued is
determined by the market value of the Company’s common stock on the last date of
the Company’s fiscal year prior to the fiscal year for which services are
rendered. The deferred share units are to be paid out in cash to each
non-employee director based upon the market value of the Company’s common stock
on the date of such director’s retirement from the Board of Directors of the
Company. The 2004 Director Plan is administered by the Board of
Directors.
Pursuant
to the 2004 Director Plan,
the
Company recorded approximately $40,000 in compensation expense related to the
issuance of 14,000 deferred share units during the year ended June 30, 2006
and
18,000 deferred share units previously issued under the
2004
Plan. During
the year ended June 30, 2005, the Company recorded $62,000 related to the
issuance of 18,000 deferred share units. The value of the share units is
adjusted to market value at each reporting period.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
H.
Commitments and
Contingencies
Leases
At
June
30, 2006, the Company leases facilities in Norwood and Cambridge, Massachusetts
under agreements through 2011. The Company is required to pay all operating
expenses for the leased premises subject to escalation charges for certain
expense increases over a base amount. Facilities rent expense was approximately
$3.3 million, $3.1 million and $3.0 million during fiscal years 2006, 2005
and
2004, respectively.
The
minimum rental commitments, including real estate taxes and other expenses,
for
the next five fiscal years under the non-cancelable operating lease agreements
are as follows (in thousands):
2007
|
|
$
|
3,482
|
|
2008
|
|
|
2,940
|
|
2009
|
|
|
711
|
|
2010
|
|
|
711
|
|
2011
|
|
|
237
|
|
Total
minimum lease
payments
|
|
$
|
8,081
|
|
Litigation
The
Company is not party to any material litigation.
I. Employee
Benefit
Plans
The
Company has a deferred compensation plan under Section 401(k) of the Internal
Revenue Code (the 401(k) Plan). Under the 401(k) Plan, eligible employees are
permitted to contribute, subject to certain limitations, up to 100% of their
gross salary. The Company makes a matching contribution of 20% of the first
7%
of the eligible employees’ contributions. In fiscal years 2006, 2005 and 2004,
the Company’s contributions to the 401(k) Plan totaled approximately $147,000,
$122,000, and $100,000, respectively.
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS
OF JUNE 30, 2006
J.
Quarterly
Financial Information (Unaudited)
|
|
Fiscal
Year 2006
|
|
|
|
First
Quarter Ended September 30, 2005
|
|
Second
Quarter Ended December 31, 2005
|
|
Third
Quarter Ended March 31, 2006
|
|
Fourth
Quarter Ended June 30, 2006
|
|
|
|
In
thousands, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and
development support
|
|
$
|
5,685
|
|
$
|
5,231
|
|
$
|
5,258
|
|
$
|
5,675
|
|
License
and
milestone fees
|
|
|
1,261
|
|
|
1,275
|
|
|
3,275
|
|
|
1,340
|
|
Clinical
materials
reimbursement
|
|
|
831
|
|
|
81
|
|
|
822
|
|
|
1,354
|
|
Total
revenues
|
|
|
7,777
|
|
|
6,587
|
|
|
9,355
|
|
|
8,369
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of clinical
materials reimbursed
|
|
|
905
|
|
|
94
|
|
|
779
|
|
|
890
|
|
Research
and
development
|
|
|
9,492
|
|
|
8,760
|
|
|
10,216
|
|
|
12,441
|
|
General
and
administrative
|
|
|
2,793
|
|
|
2,332
|
|
|
2,193
|
|
|
2,580
|
|
Total
expenses
|
|
|
13,190
|
|
|
11,186
|
|
|
13,188
|
|
|
15,911
|
|
Loss
from
operations
|
|
|
(5,413
|
)
|
|
(4,599
|
)
|
|
(3,833
|
)
|
|
(7,542
|
)
|
Interest
income,
net
|
|
|
719
|
|
|
758
|
|
|
875
|
|
|
922
|
|
Realized
gains
(losses) on investments
|
|
|
(4
|
)
|
|
(22
|
)
|
|
(7
|
)
|
|
5
|
|
Gain
on sale of
assets
|
|
|
2
|
|
|
1
|
|
|
-
|
|
|
-
|
|
Other
income
(expense)
|
|
|
-
|
|
|
366
|
|
|
(15
|
)
|
|
(30
|
)
|
Loss
before income
tax expense
|
|
|
(4,696
|
)
|
|
(3,496
|
)
|
|
(2,980
|
)
|
|
(6,645
|
)
|
Income
tax
expense
|
|
|
10
|
|
|
6
|
|
|
1
|
|
|
-
|
|
Net
loss
|
|
$
|
(4,706
|
)
|
$
|
(3,502
|
)
|
$
|
(2,981
|
)
|
$
|
(6,645
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
net loss per common share
|
|
$
|
(0.11
|
)
|
$
|
(0.09
|
)
|
$
|
(0.07
|
)
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS
OF JUNE 30, 2006
J.
Quarterly
Financial Information (Unaudited) (Continued)
|
|
Fiscal
Year 2005
|
|
|
|
First
Quarter Ended September 30, 2004
|
|
Second
Quarter Ended December 31, 2004
|
|
Third
Quarter Ended March 31, 2005
|
|
Fourth
Quarter Ended June 30, 2005
|
|
|
|
In
thousands except per share data
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and
development support
|
|
$
|
4,599
|
|
$
|
4,376
|
|
$
|
4,776
|
|
$
|
4,669
|
|
License
and
milestone fees
|
|
|
1,542
|
|
|
1,034
|
|
|
3,039
|
|
|
1,160
|
|
Clinical
materials
reimbursement
|
|
|
2,865
|
|
|
3,637
|
|
|
2,415
|
|
|
1,605
|
|
Total
revenues
|
|
|
9,006
|
|
|
9,047
|
|
|
10,230
|
|
|
7,434
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of clinical
materials reimbursed
|
|
|
2,494
|
|
|
3,042
|
|
|
2,286
|
|
|
1,414
|
|
Research
and
development
|
|
|
7,631
|
|
|
6,358
|
|
|
9,669
|
|
|
6,880
|
|
General
and
administrative
|
|
|
1,681
|
|
|
2,256
|
|
|
2,277
|
|
|
2,407
|
|
Total
expenses
|
|
|
11,806
|
|
|
11,656
|
|
|
14,232
|
|
|
10,701
|
|
Loss
from
operations
|
|
|
(2,800
|
)
|
|
(2,609
|
)
|
|
(4,002
|
)
|
|
(3,267
|
)
|
Interest
income,
net
|
|
|
328
|
|
|
421
|
|
|
510
|
|
|
571
|
|
Realized
losses on
investments
|
|
|
(3
|
)
|
|
(1
|
)
|
|
(55
|
)
|
|
(22
|
)
|
Other
income
|
|
|
7
|
|
|
-
|
|
|
1
|
|
|
-
|
|
Loss
before income
tax expense
|
|
|
(2,468
|
)
|
|
(2,189
|
)
|
|
(3,546
|
)
|
|
(2,718
|
)
|
Income
tax
expense
|
|
|
3
|
|
|
20
|
|
|
5
|
|
|
2
|
|
Net
loss
|
|
$
|
(2,471
|
)
|
$
|
(2,209
|
)
|
$
|
(3,551
|
)
|
$
|
(2,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
net loss per common share
|
|
$
|
(0.06
|
)
|
$
|
(0.05
|
)
|
$
|
(0.09
|
)
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMMUNOGEN, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
AS
OF JUNE 30, 2006
K.
Subsequent
Event
On
July 7, 2006, the Company entered into a development and license agreement
with
Biotest AG. The agreement grants Biotest AG exclusive rights to use the
Company’s TAP technology with antibodies to an undisclosed target to create
anticancer therapeutics. Under the agreement, the Company has received a $1
million upfront payment, potentially up to $35.5 million in milestone payments,
and royalties on the sales of any resulting products. The Company will receive
manufacturing payments for any preclinical and clinical materials made at the
request of Biotest. The agreement also provides ImmunoGen with the right to
elect to participate, at specific stages during the clinical evaluation of
any
compound created under this agreement, in the United States development and
commercialization of that compound in lieu of receiving royalties on United
States sales of that product and milestone payments not yet earned. The Company
can exercise this right by payment to Biotest of an agreed-upon fee of $5
million or $15 million, depending on the stage of development. Upon exercise
of
this right, ImmunoGen and Biotest would share equally the associated costs
of
product development and commercialization in the United States along with the
profit, if any, from United States product sales.
Item
9. Changes
in
and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item
9A. Controls
and Procedures
1
|
Disclosure
Controls and Procedures
|
The
Company's management, with the participation of our chief executive officer
and
chief financial officer, has evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) as of the end of the period covered by this report. Based on such
evaluation, our chief executive officer and chief financial officer have
concluded that, as of the end of such period, the Company's disclosure controls
and procedures were effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, on a timely basis,
and is accumulated and communicated to the Company's management, including
the
Company's chief executive officer and chief financial officer, as appropriate,
to allow timely decisions regarding required disclosure.
2
|
Internal
Control
Over Financial Reporting
|
|
(a)
|
Management’s
Annual Report on Internal Control Over Financial
Reporting
|
Management
of the Company
is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed
by, or under the supervision of, the Company's principal executive and principal
financial officers and effected by the Company's board of directors, management
and other personnel to provide reasonable assurance regarding the reliability
of
financial reporting and the preparation of financial statements for external
purposes in accordance with United States generally accepted accounting
principles and includes those policies and procedures that:
•
pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
•
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of
the company; and
•
provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management
assessed the
effectiveness of the Company's internal control over financial reporting as
of
June 30, 2006. In making this assessment, management used the criteria
established in Internal
Control-Integrated Framework,
issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
Based
on this
assessment, management has concluded that, as of June 30, 2006 the Company's
internal control over financial reporting is effective.
Ernst &
Young
LLP, the Company's independent registered public accounting firm, has issued
a
report on management's assessment and the effectiveness of the Company's
internal control over financial reporting, as of June 30, 2006. This report
appears immediately below.
(b) Attestation
Report of
the Independent Registered Public Accounting Firm
Report
of
Independent Registered Public Accounting Firm
The
Board of Directors and Stockholders of ImmunoGen, Inc.
We
have audited management’s assessment, included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting, that ImmunoGen,
Inc.
maintained effective internal control over financial reporting as of June 30,
2006, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(the COSO criteria). ImmunoGen, Inc.’s management is responsible for maintaining
effective internal control over financial reporting and for its assessment
of
the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management’s assessment and an
opinion on the effectiveness of the company’s internal control over financial
reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In
our
opinion, management’s assessment that ImmunoGen, Inc. maintained effective
internal control over financial reporting as of June 30, 2006, is fairly stated,
in all material respects, based on the COSO criteria. Also, in our opinion,
ImmunoGen, Inc. maintained, in all material respects, effective internal control
over financial reporting as of June 30, 2006, based on the
COSO
criteria.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of ImmunoGen,
Inc. as of June 30, 2006 and 2005, and the related consolidated statements
of
operations, stockholders' equity, and cash flows for each of the three years
in
the period ended June 30, 2006 and our report dated August 24, 2006 expressed
an
unqualified opinion thereon.
/s/
Ernst & Young
LLP
Boston,
Massachusetts
August
24, 2006
|
(c)
|
Changes
in
Internal Control Over Financial
Reporting
|
There
have not been any changes in the Company’s internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the quarter ended June 30, 2006 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
There
is
no information required to be disclosed by us in a report on Form 8-K
during the last quarter of the year ended June 30, 2006 that was not
reported.
PART III
The information called for by Part III of
Form 10-K (Item 10 — Directors and Executive Officers of the
Registrant, Item 11 — Executive Compensation, Item 12
— Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters, Item 13 — Certain Relationships and
Related Transactions, and Item 14 — Principal Accounting Fees and
Services), is incorporated by reference from our proxy statement related to
our
2006 annual meeting of shareholders, which will be filed with the SEC not later
than October 28, 2006 (120 days after the end of the fiscal year covered by
this report).
PART
IV
Item
15.Exhibits,
Financial Statement Schedules.
(a)
Financial
Statements
(1) See
"Index to Consolidated Financial Statements" at Item 8 of this Annual Report
on
Form 10-K. Schedules not included herein are omitted because they are not
applicable or the required information appears in the Consolidated Financial
Statements or Notes thereto.
(2) The
following schedule is filed as part of this Form 10-K:
Schedule II—Valuation
and Qualifying Accounts for the years ended June 30, 2006, 2005 and
2004.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to
be signed on its behalf by the undersigned, thereunto duly
authorized.
|
IMMUNOGEN,
INC.
|
|
|
|
|
By:
|
/s/
MITCHEL
SAYARE
|
|
|
Mitchel
Sayare
Chairman
of the Board and Chief Executive Officer
|
Dated:
August 28,
2006
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
MITCHEL
SAYARE
|
|
Chairman
of the
Board of Directors, Chief Executive Officer and President
|
|
August
28,
2006
|
Mitchel
Sayare
|
|
(Principal
Executive
Officer)
|
|
|
/s/
WALTER A.
BLÄTTLER
|
|
Executive
Vice
President, Science and Technology, and Director
|
|
August
28,
2006
|
Walter
A. Blättler
|
/s/
DANIEL M.
JUNIUS
|
|
Executive
Vice
President and Chief Financial Officer (Principal Financial
Officer)
|
|
August
28,
2006
|
Daniel
M.
Junius
|
/s/
DAVID W.
CARTER
|
|
Director
|
|
August
28,
2006
|
David
W.
Carter
|
/s/
STUART F.
FEINER
|
|
Director
|
|
August
28,
2006
|
Stuart
F.
Feiner
|
/s/
NICOLE ONETTO,
M.D.
|
|
Director
|
|
August
28,
2006
|
Nicole
Onetto
|
/s/
MARK
SKALETSKY
|
|
Director
|
|
August
28,
2006
|
Mark
Skaletsky
|
/s/
JOSEPH
VILLAFRANCA
|
|
Director
|
|
August
28,
2006
|
Joseph
Villafranca
|
INDEX
TO
EXHIBITS
Exhibit
No.
|
|
Description
|
(3.1)
|
|
Restated
Articles of
Organization(1)
|
(3.2)
|
|
Articles
of
Amendment to Restated Articles of Organization(17)
|
(3.3)
|
|
By-Laws,
as
amended(2)
|
(4.1)
|
|
Article
4 of the
Restated Articles of Organization as amended (See Exhibits 3.1 and
3.2)(1)
|
(4.2)
|
|
Form
of Common Stock
Certificate(6)
|
(10.1)
|
|
Research
and License
Agreement dated as of May 22, 1981 by and between the Registrant and
Sidney Farber Cancer Institute, Inc. (now Dana-Farber Cancer
Institute, Inc.) with addenda dated as of August 13, 1987 and
August 22, 1989(4)
|
(10.2)
|
|
Amended
and Restated
Registration Rights Agreement dated as of December 23, 1988 by and
among the Registrant and various beneficial owners of the Registrant's
securities(4)
|
(10.3)
|
x
|
Restated
Stock
Option Plan(19)
|
(10.4)
|
x
|
Letter
Agreement
Regarding Employment dated as of October 1, 1987 between the
Registrant and Dr. Walter A. Bl’ttler(4)
|
(10.5)
|
|
Lease
dated May 15,
1997 by and between Harry F. Stimpson, III, as trustees, lessor,
and the Registrant, lessee(3)
|
(10.6)
|
|
Leases
dated as of
December 1, 1986 and June 21, 1988 by and between James H.
Mitchell, Trustee of New Providence Realty Trust, lessor, and Charles
River Biotechnical Services, Inc. ("Lessee") together with Assignment
of Leases dated June 29, 1989 between Lessee and the
Registrant(6)
|
(10.7)
|
|
First
Amendment,
dated as of May 9, 1991, to Lease dated as of June 21, 1988 by and
between James A. Mitchell, Trustee of New Providence Realty Trust,
lessor, and the Registrant(7)
|
(10.8)
|
|
Confirmatory
Second
Amendment to Lease dated June 21, 1988 by and between James A.
Mitchell, Trustee of New Providence Realty Trust, lessor, and the
Registrant, Lessee(3)
|
(10.9)
|
x
|
Letter
Agreement
Regarding Compensation of Mitchel Sayare, dated April 29,
1994 (8)
|
(10.10)
|
|
Lease
dated as of
December 23, 1992 by and between Massachusetts Institute of Technology,
lessor, and the Registrant, lessee(5)
|
(10.11)
|
|
Option
Agreement
dated April 5, 1990 by and between the Registrant and Takeda Chemical
Industries, Ltd.(9)
|
(10.12)
|
|
Amendment
to Lease
dated August 31, 1995 between Massachusetts Institute of Technology,
as lessor, and the Registrant, as lessee(10)
|
(10.13)
|
|
Letter
Agreement
dated as of June 6, 1996 by and among the Registrant and Capital
Ventures International regarding an amendment to their agreement
dated
March 15, 1996(11)
|
(10.14)
|
|
Registration
Agreement dated July 31, 1997 between Apoptosis Technology, Inc. and
the Registrant(3)
|
(10.15)
|
|
License
Agreement
dated effective June 1, 1998 by and between the Registrant and
Pharmacia & Upjohn AB*(3)
|
(10.16)
|
|
License
Agreement
dated February 1, 1999 between the Registrant and SmithKline Beecham
Corporation*(12)
|
(10.17)
|
|
Stock
Purchase
Agreement dated February 1, 1999 between the Registrant and SmithKline
Beecham plc*(12)
|
(10.18)
|
|
License
Agreement
dated effective May 2, 2000 by and between the Registrant and Genentech,
Inc.*(13)
|
(10.19)
|
|
Heads
of Agreement
dated effective May 2, 2000 by and between the Registrant and Genentech,
Inc.*(13)
|
(10.20)
|
|
Development,
Commercialization and License Agreement dated effective May 4, 2000
by and between the Registrant and British Biotech Pharmaceuticals
Limited*(13)
|
(10.21)
|
|
Collaboration
and
License Agreement dated as of September 29, 2000 by and between the
Company and MorphoSys AG.*(14)
|
(10.22)
|
|
Option
and License
Agreement dated September 5, 2000 by and between Abgenix, Inc. and
the
Company.*(15)
|
(10.23)
|
|
Letter
Agreement for
Stock Purchase dated September 6, 2000 by and between Abgenix, Inc.
and
the Company.*(15)
|
(10.24)
|
|
Agreement
between
ImmunoGen, Inc. and Millennium Pharmaceuticals, Inc., dated March 30,
2001.*(16)
|
(10.25)
|
|
Agreement
between
ImmunoGen, Inc. and Raven Biotechnologies, Inc., dated March 28,
2001.*(16)
|
(10.26)
|
|
Development
and
License Agreement dated effective November 27, 2001 by and between
the Registrant and Boehringer Ingelheim International
GmbH.*(17)
|
(10.27)
|
x
|
2001
Non-Employee
Director Stock Plan(18)
|
(10.28)
|
|
Termination
of the
Developmental, Commercialization and License Agreement made between
Vernalis (R&D) Limited, dated January 2004*(20)
|
(10.29)
|
|
Biopharmaceutical
Development and Services Agreement dated April 16, 2004 by and between
Laureate Pharma, L.P. and the Company*
|
(10.30)
|
x
|
Letter
Agreement
Regarding Employment dated as of April 18, 2005 between the Registrant
and
Mr. Daniel M. Junius
|
(10.31)
|
|
Process
Development
Agreement between the Registrant and Genentech, Inc., dated as of
May 3,
2006*
|
(10.32)
|
|
Amendment
to License
Agreement for Anti-HER2 Antibodies between the Registrant and Genentech,
dated as of May 3, 2006*
|
(21)
|
|
Subsidiaries
of the
Registrant, filed herewith
|
(23)
|
|
Consent
of Ernst
& Young LLP, filed herewith
|
(31.1)
|
|
Certification
of
Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, filed herewith
|
(31.2)
|
|
Certification
of
Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, filed herewith
|
(32)
|
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith
|
(1)
|
|
Previously
filed
with the Commission as Exhibits to, and incorporated then herein
by
reference from, the Registrant’s Registration Statement on Form S-1, File
No. 33-38883.
|
(2)
|
|
Previously
filed
with the Commission as Exhibits to, and incorporated herein by reference
from, the Registrant's annual report on Form 10-K for the fiscal year
ended June 30, 1990.
|
(3)
|
|
Previously
filed
with the Commission as an exhibit to, and incorporated herein by
reference
from, the Registrant's annual report on Form 10-K for the year ended
June 30, 1997.
|
(4)
|
|
Previously
filed
with the Commission as Exhibits to, and incorporated herein by reference
from, the Registrant's Registration Statement on Form S-1, File
No. 33-31219.
|
(5)
|
|
Previously
filed
with the Commission as Exhibits to, and incorporated herein by reference
from, the Registrant's quarterly report on Form 10-Q for the quarter
ended December 31, 1992.
|
(6)
|
|
Previously
filed
with the Commission as Exhibit No. 10.10 to, and incorporated herein
by reference from, the Registrant's Registration Statement on
Form S-1, File No. 33-31219.
|
(7)
|
|
Previously
filed
with the Commission as Exhibit No. 10.10a to, and incorporated herein
by reference from, the Registrant's Registration Statement on
Form S-1, File No. 33-43725, as amended.
|
(8)
|
|
Previously
filed
with the Commission as Exhibits to, and incorporated herein by reference
from the Registrant's annual report on Form 10-K for the year ended
June 30, 1994.
|
(9)
|
|
Previously
filed
with the Commission as Exhibit No. 10.15 to, and incorporated herein
by reference from, the Registrant's Registration Statement on
Form S-1, File No. 33-38883.
|
(10)
|
|
Previously
filed as
Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, and incorporated herein by
reference.
|
(11)
|
|
Previously
filed as
Exhibit 10.29 to the Registrant’s Current Report on Form 8-K for the June
6, 1996 event, and incorporated herein by reference.
|
(12)
|
|
Previously
filed as
an exhibit to, and incorporated herein by reference from, the Registrant’s
quarterly report on Form 10-Q for the quarter ended December 31,
1998.
|
(13)
|
|
Previously
filed as
an exhibit to, and incorporated herein by reference from, the Registrant's
annual report on Form 10-K for the fiscal year ended June 30,
2000.
|
(14)
|
|
Previously
filed as
an exhibit to, and incorporated herein by reference from, the Registrant's
current report on Form 8-K filed October 10,
2000.
|
(15)
|
|
Previously
filed as
an exhibit to, and incorporated herein by reference from, the Registrant's
current report on Form 8-K/A filed October 10,
2000.
|
(16)
|
|
Previously
filed as
an exhibit to, and incorporated herein by reference from, the Registrant's
quarterly report on Form 10-Q for the fiscal quarter ended
March 31, 2001.
|
(17)
|
|
Previously
filed as
an exhibit to, and incorporated herein by reference from, the Registrant's
quarterly report on Form 10-Q for the fiscal quarter ended
December 31, 2001.
|
(18)
|
|
Previously
filed as
exhibit to, and incorporated herein by reference from, the Registrants
Registration Statements on Form S-8, File
No. 333-75374.
|
(19)
|
|
Previously
filed as
an exhibit to, and incorporated herein by reference from, the Registrants
Registration Statement on Form S-8, File
No. 333-75372.
|
(20)
|
|
Previously
filed as
an exhibit to, and incorporated herein by reference from, the Registrant’s
quarterly report on Form 10-Q for the fiscal quarter ended March
31,
2004.
|
(x)
|
|
Exhibit
is a
management contract or compensatory plan, contract or arrangement
required
to be filed as an exhibit to Form 10-K.
|
(*)
|
|
The
Registrant has filed a confidential treatment request with the Commission
with respect to this document.
|
IMMUNOGEN,
INC.
SCHEDULE
II -
VALUATION AND QUALIFYING ACCOUNTS
(In
thousands)
COLUMN
A - DESCRIPTION
|
|
COLUMN
B
|
|
COLUMN
C - ADDITIONS
|
|
COLUMN
D
|
|
COLUMN
E
|
|
Inventory
Write-downs
|
|
Balance
At Beginning of Period
|
|
Charged
to Costs and Expenses
|
|
Charged
to Other Accounts
|
|
Use
of Zero Value Inventory
|
|
Balance
at End of Period
|
|
Year
End June 30,
2006
|
|
$
|
3,686
|
|
|
153
|
|
|
-
|
|
|
(917
|
)
|
$
|
2,922
|
|
Year
End June 30,
2005
|
|
$
|
1,684
|
|
|
2,312
|
|
|
-
|
|
|
(310
|
)
|
$
|
3,686
|
|
Year
End June 30,
2004
|
|
$
|
1,197
|
|
|
777
|
|
|
-
|
|
|
(290
|
)
|
$
|
1,684
|
|